(Published in Beef Improvement News)
Pressure is mounting on Australia’s regional politicians following the conclusion of a six-month Parliamentary inquiry into the effects of concentration of market power in the grocery industry. Recommendations made by the Joint Select Committee on the Retailing Sector have failed to satisfy thousands of small retailers, who contend that major chains will continue to legally force them out of business. The retailers have put the Federal Government on notice for the next election, saying that major chain dominance will continue to be an issue, particularly in marginal seats.
Big food retailers emerged apparent winners from the retail sector inquiry, with the committee deciding not to adopt the 25% cap on market share proposed by the small retailers.
Instead the committee recommended an industry ombudsman, a new retail code of conduct and strengthening the Trade Practices Act to address predatory pricing activities and creeping acquisitions.
Evidence, most particularly from the Australian Competition and Consumer Commission, convinced the committee that the 25% cap on market share for each supermarket chain proposed by the National Association of Retail Grocers of Australia, would be unworkable, protectionist and regulate consumer spending.
This was welcomed by the major supermarkets, with Coles Managing Director, Alan Williams, saying he was pleased the committee realised that intervention in the grocery market will not address the underlying problems of rural and regional Australia.
Spokesperson for NARGA, Alan McKenzie was disappointed with the committee’s recommendations, saying they were not strong enough to prevent entrenched anti-competitive trade practices forcing small retailers our of business.
“We are now looking to the politicians, especially in rural and regional seats, to demonstrate their previously stated support for small business and rural Australia by strengthening the recommendations through the Parliamentary process,” Mr McKenzie said.
There are signs that at least some of the recommendations will be implemented, but possibly watered down to just the ombudsman and a retail code of conduct.
Mr McKenzie said these recommendations alone will have no effect on combating the growing stranglehold of major chains in the retail grocery sector and would be “like flogging the major supermarket chains with wet lettuce”
“We are expecting much more and believe it is a matter of political will on behalf of the committee members and their political parties.”
However a number of the recommendations are likely to concern the major retailers.
Rachel Trindade of Clayton Utz (The Age 13/9/99) said the recommendation of most concern to the major supermarkets is one which called for the committee to reconvene in three years to consider reversing the onus of proof under Section 46 of the Trade Practices Act which prohibits misuse of market power.
The potential implication of this is to shift the onus of proof from the person making the allegation about misuse of market power to the company, which would have to prove its innocence. Ms Trindade said this could mean any business that took advantage of superior efficiency, technology and products would face a new risk of exposure.
The report is now in the hands of the Minister for Industrial Relations and Small Business, Peter Reith, who will determine what recommendations are introduced by the Government through legislation. He is due to report to Parliament by November 30th.
What the committee found
Consumers are satisfied with lower grocery prices, better range of products, longer trading hours and convenience offered by supermarkets.
Growth of major chains over the past 20 years has been at the direct expense of independents, whose profitability and market share is declining.
Vertical integration has given major chains commercial advantage over independents.
Some major chains are engaged in predatory pricing to “wipe out the competition.”
Behaviour of the major chains is inconsistent with their public image as good corporate citizens.
What the committee recommended
1. Strengthen the Trade Practices Act
Give the ACCC powers to bring representative actions and to seek damages on behalf of third parties in order to prevent predatory pricing activities. Provide additional funding to the ACCC.
Provide for the definition of ‘market’ to include a ‘regional market’ in section 50 of the Trade Practices Act, which deals with the prohibition of acquisitions that would result in substantial lessening of competition.
Mandatory notification to the ACCC for approval of store acquisitions by major chains and others. ACCC required to consult with other parties about acquisition.
Increase $1million transaction threshold to $3 million to make unconscionable conduct provisions available to a wider group of people.
2. Establish an Independent Retail Industry Ombudsman
3. Introduce a mandatory Retail Industry Code of Conduct.
Regulate conduct in vertically integrated relationships throughout the supply chain. This would enable Courts to take provisions of the code into account when determining unconscionable conduct.
4. Government to investigate implementing a Uniform Retail Tenancy Code.
Recommended by the 1997 Reid Report.
5. Major chains to be discouraged from dispensing pharmaceutical goods.
6. Committee to reconvene in three years time.
Review progress and determine if further legislation changes are required, including reversing of onus of proof legislation.
Links
Fair Market or Market Failure can be viewed at www.aph.gov.au/senate/committee/retail_ctte/
