In an effort to tackle market concentration and anti-competitive practices in Australia’s grocery sector, National’s Leader David Littleproud and Shadow Treasurer Angus Taylor announced new legislative initiatives in Parliament on Nov. 4.
Littleproud, who is also the shadow agriculture minister, has proposed a new Bill to enhance consumer protections and divestiture powers, while Taylor has suggested amendments to the Competition and Consumer Act focusing on divestiture orders as a remedy for breaches.
A divestiture order is a court order that forces a corporation to reduce its power in a market or its share of that market.
Increase in Penalties
Littleproud’s proposed bill seeks to establish a framework designed to increase penalties for supermarket misconduct.It will introduce significant infringement notices of $2 million, which the Australian Competition and Consumer Commission (ACCC) could impose for breaches of the grocery code.
“Why wouldn’t we give the ACCC the tools that they want,” he said.
He further explained that the idea is to gradually increase penalties up to $10 million or 3 percent of the company’s financial gain from misconduct, with the specific amount determined by a court.
However, the ACCC would only take a case to court if it believes it can secure a penalty greater than $1 million.
Littleproud added that the framework’s main aim is to fix the system.
Introducing Divestiture Orders
In tandem with Littleproud’s proposals, Taylor’s amendments focus on the introduction of divestiture orders as a remedy for breaches of Section 46 of the Competition and Consumer Act, which pertains to the abuse of market power.He stated if a court finds a breach of Section 46, either an involved party or the ACCC can seek a divestiture order within 18 months of finding the breach.
This approach would serve as a last resort for egregious market behaviour, complementing other penalties that can be imposed along the way.
Woolworths, Coles Control
Addressing the oligopolistic practices in the grocery sector, Taylor referenced research from the e61 Institute, which indicates that supermarkets are heavily concentrated in local markets, particularly in regional areas, leading to high levels of customer inertia.According to the data, 33 percent of Woolworths customers would consider another Woolworths store as their most likely alternative shopping destination, emphasising the lack of genuine competition.
Taylor also pointed to the ACCC’s findings that Woolworths and Coles control just over two-thirds of the national supermarket sales.
In its 265-page interim report released on Sept. 27, Woolworths and Coles were labelled key players in an “oligopoly.”
In addition, the supermarket giants were revealed to have lost consumer trust, with nearly half of the respondents complaining about prices, up from 17 percent in 2008.
Taylor said the merger regime to prevent the practice of creeping acquisitions within the supermarket sector has proven ineffective, reinforcing the need for divestiture penalties.
“This will serve as a crucial tool for the ACCC to address anti-competitive behaviour and ensure that consumers, suppliers, and small businesses are treated fairly,” he said.
The ACCC has already taken Woolworths and Coles to court for misleading consumers, accusing them of breaching Australian Consumer Law by making deceptive “discount pricing” claims on hundreds of everyday products.
Creating a Supermarket Commissioner
A key component of Littleproud’s bill is the establishment of a Supermarket Commissioner to address the concerns raised by farmers regarding their treatment by major supermarket chains.Many farmers have reported mistreatment but have refrained from speaking out due to fears of retribution and losing supply contracts.
“We have heard inquiry after inquiry of farmers coming forward of the mistreatment of these two supermarkets who controlled the market,” Littleproud asserted.
Government’s Approach to the Challenge
In October, the Albanese government unveiled a bill to reform merger laws, marking a significant shift in competition policy in nearly 50 years.Introduced by Treasurer Jim Chalmers on Oct. 10, the legislation seeks to distinguish between mergers that hinder competition and those that offer genuine economic advantages.
Key reforms include empowering ACCC to conduct more effective scrutiny of mergers, with expedited approvals for transactions deemed non-threatening to competition, which will now be cleared within 30 working days.
Additionally, the reforms implement a mandatory notification system, requiring businesses to inform the ACCC of certain mergers prior to proceeding, thus preventing potentially harmful mergers from slipping through the cracks.
The legislation will also focus more intently on mergers that could create or reinforce substantial market power, subjecting them to detailed examination while fast-tracking beneficial mergers.
Lastly, a public register of all notified mergers will be established to enhance transparency within the marketplace.
On Oct. 1, the government also announced an increase in funding for the ACCC, amounting to around $30 million, to enable a crackdown on misleading and deceptive pricing practices in the supermarket and retail sector.
