TOM ELLIOT:
The market share of the two big supermarkets, Coles and Woolworths has gone from around 60 per cent to between 80 and 85 per cent depending on whose statistics you believe. Now this has just occurred bit by bit by bit. It wasn't just some massive takeover that led to this dominance. Of course a decade ago we had the introduction of so called shopper dockets for cheaper fuel purchases. Now when they started it, it was only a couple of cents a litre, then it was four cents then it was eight cents. At times now, it's as much as 40 cents per litre off and obviously what the supermarkets want you to do is make sure you do your grocery shopping with them so that at the same time when you come to buy petrol you'll also buy petrol from their outlets. Um the supermarkets would love to get into the pharmaceutical game thus far they have been prevented from doing so by the lobbying of the Pharmacists Guild. However, I suspect that at some stage in the next few years that will stop and you'll start seeing pharmacies inside the two big supermarkets. All this has come at a cost to the traditional corner shop. You very rarely see milk bars these days, so many of them have shut down because they simply cannot compete. And also the suppliers to supermarkets. The big ones here have copied their British counterparts and introduced the home brands. So instead of seeing lots and lots of independent brands you maybe see one or two independent brands and then you see the Coles and Woolies brands. And they are often made by the same factories but sold at a substantially cheaper price. Now all of this is great news if you're a shareholder in Wesfarmers which owns Coles or in Woolworths which has done extraordinarily well for its shareholders over the past ten or so years. But it's made life very very tough for small businesses, for the corner shop, smaller supermarkets that used to exist, the independents which have largely disappeared and also suppliers. Anyway the ACCC has looked at all this. It's probably about 10 years too late but in any case it's saying it wants to try get rid of any oppressive business practices that the supermarkets are engaging in. Joining me on the line now is the Minister for Small Business here in Victoria, Bruce Billson. Mr. Billson good afternoon.
BRUCE BILLSON:
Great to speak to you Tom and with your listeners.
TOM ELLIOT:
Well thank you very much for joining us now. Obviously the ACCC cannot comment on these things while the investigation into any business practices or any odious business practices by Coles and Woolies is ongoing, but as the Minister for Small Business how do you see it?
BRUCE BILLSON:
Oh look we've got quite a lot of work going on because you've characterised, Tom, some of the trends and trajectories that have been causing some concern in our economy where efficient small businesses, in some cases haven't had the opportunity to proper and compete because they've been up against very large businesses able to exercise their muscle, competition on muscle not on merit in some cases, and that's seen a real lot of head winds for our smaller businesses and our suppliers. And I think that's contributed to the reduction in small business employment that we've seen over recent years in particular.
TOM ELLIOT:
Is there anything that can be done though? I would have thought if you have 80 to 85 per cent market share which in general groceries is what Coles and Woolies have now. Its similar with liquor, their market share is between 50 and 60 per cent. Is there anything now that can be done about that?
BRUCE BILLSON:
Yeah there is plenty that can be done and there's a lot actually being done. The ACCC have been conducting rather extensive investigations, not only into the shopper docket issue that you touched on in your opening remarks Tom, but also in the broader relationship the big supermarkets have with suppliers. Ah two of those two issues, let's take them separately. In the shopper docket space where you've got a few cents as a discount, a lot of people like that. They feel good, they're are getting a little bit back for their shop at the supermarket. And really an efficient small petrol retailer can still compete in that space albeit the competition's pretty stiff. You start adding another digit to that discount and you're starting to get into the teens cents a litre or twenty, thirty even forty cents. No efficient small business retailer of fuel can compete at that level and it starts distorting the market place, it starts having a real impact on the choice available for motorists and that's where the ACCC is doing some work. In that space also Tom, if the businesses are related where you are encouraged to engage in a transaction at one business in order to obtain a benefit at another business, where they're related businesses they don't need to get passed through a consumer benefit test. Whereas if they are separate businesses you have to show the commission that there's an overall net benefit to consumers. So there's an area where we think certain practices now in the law itself need to be examined. That's why we've committed to a root and branch review of competition laws to make sure the ACCC has the toolkit it needs. And then the last area that I would talk about is the food and grocery industry code that we received today where Coles and Woolworths, to their credit, have worked with the Food and Grocery Council to come up with a code of conduct that governs their relationship with suppliers. Many of whom rely incredibly heavily on Coles and Woolworths continuing to buy their production but feeling they can't always negotiate on fair commercial terms because the supermarkets are such behemoths in our economy.
TOM ELLIOT:
I've gotta say, I hear everything you're saying but I worry that the horse has well and truly bolted but I mean such is the power of Coles and Woolies, there's not much now that can be done. But just going to what you said about um, you know, the businesses that supply the supermarkets. I mean it used to be that supermarkets were sort of like the landlord and in between, when you go inside, was a whole lot of brands that competed with each other. But now of course the major brands often very much other supermarkets own brands themselves. I mean, do they represent a threat to the viability of some of the suppliers?
BRUCE BILLSON:
Yes they do and they represent a challenge to consumers as well Tom where you start seeing consumer choice and product innovation curtailed because the supermarkets have said 'look we'll carry the leading brand in a particular category or maybe one other but then beyond that we want to enter into some other arrangement with people who can produce good quality homebrand products. Now this code that we received today actually tackles that and says if you're a buyer in a supermarket and you're a, say, negotiating with the main supplier for a category leading brand and they start talking, and the supplier starts talking about some innovation or new product that they want to put to the supermarket. Basically we're saying the supermarket can't go and grab that idea, take the intellectual property and race off somewhere else to get it made as a homebrand. So that's one of the constraints that's in this code along with clear and understood terms. A restriction on having contracts that let the big player basically say well, under this contract we can do whatever we please. Ah shrinkage and wastage you know if there is a loss of stock in some arrangements, the suppliers had to pay for that. And even the way in which a product is delisted Tom. If you and I were investing in a business to produce a particular item and then overnight without any notification and really against the big investment that we've made, there's a decision to go an delist our product. I mean that can leave us and the mortgage on our house and our, you know our own business in quite a precarious situation. That's what the code's about.
TOM ELLIOT:
We'll leave it there. Bruce Billson Federal Minister for Small Business, thank you very much for your time.
BRUCE BILLSON:
Great to speak with you Tom.