CHARLIE PICKERING:
Australia’s supermarket giants could be fined billions of dollars if they breach a revamped and mandatory code of conduct designed to fix the imbalance of bargaining power between major grocery chains and small suppliers. Woolworths would face maximum penalties of $5 billion, Coles up to $3.8 billion, and Aldi, around a billion dollars, which shakes out at the end of the day to around 10 per cent of each company’s annual turnover. That’s the recommendation of a major review tasked with strengthening the Food and Grocery Code of Conduct and making it a mandatory code of conduct. The report also recommends stronger protections against retribution for suppliers who make complaints. What do you think? Is that going to make a difference? 1300 222 774 is the number to call. Or are consumers always going to end up paying for whatever extra costs the supermarkets face? Well, to talk about the report, the code and where to from here, I’m joined by Andrew Leigh, Assistant Minister for Competition, Charities and Treasury. Andrew, welcome to ABC Drive on 774.
ANDREW LEIGH:
Thanks, Charlie. Great to be with you.
PICKERING:
Now, Andrew, what are these measures meant to achieve?
LEIGH:
Well, as Spiderman once told us, with great power comes great responsibility, and the supermarkets do have an awful lot of power. Between them the top 3 have 75 per cent market share. And as you said, Woolies has turnover this year exceeding $50 billion. So, it’s important that they’re doing the right thing, not only by their consumers but also by their suppliers. In economic jargon, when you’ve got big firms, you’re worried not only about monopoly power, but also monopsony power. We’ve heard stories from farmers about being squeezed and about the Liberal and National voluntary code not working.
PICKERING:
Hang on, I’ve got to stop you. I’ve heard about monopoly power. I have not heard about monopsony power.
LEIGH:
Well, monopsony power is the idea that when you’ve got a lot of power, you’re able to squeeze on both ends of the spectrum. You can squeeze not only your consumers by driving up prices, but you can also squeeze your suppliers by driving down what you pay them, or indeed by driving down what you pay your workers. So, we’ve got to look out for both of these things and that’s why we’ve got the work going on at the ACCC. It’s why last week we announced the CHOICE price monitoring so consumers get a better deal at the checkout. And it’s why we’re updating the Food and Grocery Code, so that it’s a Food and Grocery Code with teeth – a mandatory code.
PICKERING:
So, what have supermarkets been doing to muscle suppliers? Obviously, other than just using their size to screw them on price.
LEIGH:
One of the challenges comes up most, Charlie, is if you’ve got perishables, fruit and veg, imagine you pick your crop, you’re ready to send it off, and then suddenly you’re told that it’s not of sufficient quality. If those quality standards aren’t clear, that really leaves the grower in a bind. There’s only a couple of majors to sell to and so the growers can find themselves with produce that’s either underpaid for or else just rotting. This Code ensures that the supermarkets, in the case of fresh food, need to have reasonable standards. It ensures that they have to have buyers who aren’t incentivised to behave badly, and it allows for anonymous complaints to be made. There’s very few complaints going through at the moment. I don’t think that’s because the system’s perfect, I think that’s because suppliers are scared.
PICKERING:
So, how have suppliers responded to these suggestions?
LEIGH:
The supermarkets have engaged with Craig Emerson, our independent reviewer, and to his credit, he’s got them to agree that there will be a dispute resolution process with penalties up to $5 million. Constitutionally, we’re not able to impose that, but Craig Emerson’s worked with them. They understand the community concern and the fact that Australian families want farmers to get a fair deal.
PICKERING:
Right, but you make the point there, we’re talking about moving from a voluntary code to a mandatory code. But a code only lasts as long as the big supermarkets want to be a part of it.
LEIGH:
Well talking particularly about the dispute resolution processes where the Commonwealth can’t legislate dispute resolution in the way in which the supermarkets have agreed to. The Code as a whole does have constitutional support, and that will carry significant penalties. These aren’t going to be optional penalties. The significant penalties for a breach of the Code are there and will, I hope, drive much better behaviour. I don’t want to see anyone getting a penalty, I want to see farmers getting a better deal.
PICKERING:
You say that, though. But these penalties, we’re not just talking millions, we’re talking up to billions of dollars. And when there are disputes, you’d have to say the supermarkets have infinitely bottomless pockets compared to the suppliers. So, when they inevitably litigate, who’s going to back the suppliers in that situation? Is the government going to fund the litigation?
LEIGH:
We’re giving resources to the Australian Competition Consumer Commission to look into this, to be able to oversee how the system operates and to be the independent cop on the beat. It’s always a challenge in competition law. Competition law is often about scrappy start‑ups challenging deep‑pocketed incumbents. So, that’s the reason you need a strong competition regulator. I’ve got to say, under Gina Cass‑Gottlieb the Australian Competition Consumer Commission has been doing a terrific job. And in the face of a cost‑of‑living crisis, it’s really important we get more competition in the Australian economy.
PICKERING:
Opposition leader, Peter Dutton, called this a Mickey Mouse review that wouldn’t bring consumers the cost‑of‑living relief that they’re seeking. And you’d have to admit that consumers could be forgiven for thinking that even if this works to get a better deal for suppliers, we are all going to end up paying for this at the checkout, and that is never going to change.
LEIGH:
Let me give you one example, Charlie: we’ve seen a couple of months back the prices for lamb falling for the farmers but not falling for the consumers. That led a lot of people to ask the question, how can this be happening? How is this fair? So, you can look after consumers and farmers at the same time. It’s about making sure you get transparency in the system, penalties for doing the wrong thing, and as much information in the hands of consumers as possible. Information is power, which is why we’ve got this CHOICE quarterly price monitoring taking place, allowing shoppers to see where they can get the very best deal. And if they’re not getting the best deal, go around the corner and get a better one.
PICKERING:
I’m talking with Assistant Minister for Competition Andrew Leigh on 774 Drive about the new suggested mandatory code to get a better deal for suppliers at supermarkets. Now, Andrew, cost of living isn’t just the biggest issue facing Australia. It’s a stated top priority of your government. And I don’t doubt that you would dearly love to make things cheaper for Aussies in supermarkets. It’d be great for your re‑election chances, if nothing else. But are the supermarkets just so big and powerful and persuasive and pervasive that achieving anything meaningful is impossible?
LEIGH:
Charlie, I’ve been pretty passionate about competition policy for the decade or so that I’ve had the portfolio for my party. Over that period, we have seen pretty slow productivity growth under the former government, and one of the reasons for that is a lack of competition dynamism. We’ve set up the biggest review of mergers in 50 years, improving the merger system. We’re looking at non‑compete clauses that constrain workers from moving to better‑paying jobs. And we’ve asked the states and territories to work with the Commonwealth on revitalising National Competition Policy. Competition is one of the key tenets of the government’s economic agenda. It’s all about driving better prices now and better productivity in the long run. It’s absolutely vital to Australia’s economic interests and to the household living standards of Australians.
PICKERING:
The success of this, though, at the end of the day is going to come down to the goodwill of the supermarkets to participate fully. I’m just struggling to think of a time the supermarkets have listened to criticism and done the right thing. Can you recall one for me, Andrew?
LEIGH:
Well, let’s be clear. This is a code with teeth, and sitting alongside that is a mediation and arbitration system which they’ve opted into. They’re not opting into some kind of an overall voluntary code. You have a mandatory code in place with penalties. And then where you’ve got disputes, you’ve got an approach which the supermarkets have agreed can lead to penalties, to lead to penalties of up to $5 million. And you’ve got to look at this in the broader context: the quarterly price monitoring, the ACCC inquiry. And then, of course, we’re only a week away now from Australians — every Australian taxpayer getting a tax cut, $300 energy bill relief, and the lowest paid 2 million workers getting a government‑backed pay rise.
PICKERING:
That was very well delivered, but nothing to do with the goodwill of the supermarkets. But thank you, Andrew.
LEIGH:
I answered your question very directly there, Charlie. This is a mandatory code that will apply to every supermarket over $5 billion.
PICKERING:
Now, you’re not just an Assistant Minister, you’re a consumer as well. What are your tricks for saving money at the supermarket, Andrew?
LEIGH:
I try to do split basket shopping where I can, look at where you can get cheaper groceries. Try to make sure that you scan those cards, the loyalty discounts are quite substantial. And then buy in bulk where you can. One of the reasons that we have low‑income Australians often paying more is not only because people find it harder to travel to get the cheapest deal, but also because low‑income people often can’t buy in bulk. So, there is this kind of poverty tax effect that you see. And one of the things we’ve been looking to do is to make sure that things aren’t just good for well‑informed insiders like me, but are good for everyone. You want to make the system easy and you want to make prices low for everyone.
PICKERING:
Assistant Minister for Competition, Andrew Leigh, thank you for your time this afternoon.
LEIGH:
Real pleasure, Charlie.