JO TRILLING:
The major supermarkets could cop fines in the billions of dollars as part of a suite of recommendations in a new report examining the power and behaviour of Coles, Woolies, Aldi and Metcash, which runs many IGA’s. The review into the grocery chains’ conduct was led by former Labor MP Craig Emerson, and today, the federal government announced it will implement all of his recommendations. So, what’s set to change, and what does it mean for you at the checkout? Dr Andrew Leigh is the Assistant Minister for Competition. Good afternoon.
ANDREW LEIGH:
Good afternoon, Joanna. Great to be with you and your listeners.
TRILLING:
Let’s start with the Grocery Code of Conduct. It’s been voluntary, I think, for about a decade. It’s now set to be mandatory. What sorts of things will that ensure?
LEIGH:
This is all about governing the relationships between the biggest supermarket chains and their suppliers. It covers big supermarket chains with a turnover above $5 billion, which at the moment means you’ve got Coles, Woolies, Aldi and Metcash. We’ve heard too many stories about bad behaviour by the big supermarket chains, complaints from farmers, and also concerns from farmers that they can’t make public complaints for fear of reprisals. If there’s only a couple of people you can sell your stuff to, you don’t want to get one of them offside. So, the risk is that supermarkets have been behaving badly and getting away with it. That changes under a mandatory code. This is going to be the toughest industry code that we have, which is appropriate given the heavy concentration in the grocery sector, with the top 3 having 75 per cent of all revenue.
TRILLING:
We’ve already heard today from Rachel Chambers from Queensland Growers. She says that, you know, the big players still hold significant power, and even this doesn’t go far enough.
[Excerpt]
RACHEL CHAMBERS:
We don’t want to see growers putting up a complaint and then potentially have a legal suit. It’s going to have to be making sure that the themes get dealt with, not the individual growers, because we have to fix the behaviour which is rampant through the sector.
[End of Excerpt]
TRILLING:
So, she’s saying we have to fix the behaviour that’s rampant. How will this work? How will this protect producers?
LEIGH:
This is going to protect producers by allowing anonymous complaints to be made through the ACCC. It also has significant penalties attached. There will be an independent arbitration mechanism which will be able to issue penalties of up to $5 million, and we will have a system in place which is appropriate for the scale of the sector. The Liberals and Nationals set this up as a voluntary code, no appropriate penalties attached. We’re saying no, it needs to be a mandatory code with significant penalties. And it’s taken a Labor government to put those protections for farmers into place.
TRILLING:
So, what happens if there is a breach? How will these fines actually work?
LEIGH:
It’ll operate in the same way in which other breaches in the Competition Act operate. Obviously, we need to bring in legislation, which we’ll do before the current voluntary code expires. It ensures that we have a framework in place that is good for farmers, good for suppliers, and ensures that consumers are getting a good deal at the checkout. It’s part of a suite of measures we’re implementing: a review of the supermarkets by the competition watchdog; grocery price monitoring, the first report of which came out last week; and the broader work we’re doing on competition, particularly around merger law reform.
TRILLING:
Just back to when it will actually come into force. This is the – you’ve got this sitting period before you break for winter. Is the legislation going to be introduced in this sitting period or what sort of timelines are we talking?
LEIGH:
We’ve only announced today that we’re adopting the recommendations of the Emerson review. We need to then go about drafting legislation. We’ll do that in a calm and considered way, because it’s really important for farmers to get the detail right and that’ll be in place before the current voluntary code expires.
TRILLING:
So, in what kind of circumstances would a maximum fine – that 10 per cent of annual turnover – actually be a penalty?
LEIGH:
There’s 3 legs to the penalties. It can be either $10 million, 3 times the ill‑gotten gains, or if that can’t be determined, then 10 per cent of turnover. This is for the most egregious breaches. Really, my hope is that we don’t have any of those egregious breaches. My hope is that, as we see in other contexts where there are large penalties, it changes the incentives and forces a change in behaviour.
One of the recommendations Craig Emerson made is that we need to ensure that the large supermarkets have their buyers behaving appropriately towards suppliers. For example, you don’t want the buyers to have in their contract some sort of an incentive to misbehave.
TRILLING:
I am speaking to Dr Andrew Leigh, the Assistant Minister for Competition. The federal government today has announced a mandatory Code of Conduct. Who’s going to investigate complaints? We discussed earlier, you know, suppliers who have concerns with – or issues with the behaviour or tactics of one of the big supermarkets. How do you ensure sort of independent oversight?
LEIGH:
We’ll have the oversight operating through the competition watchdog, a very strong regulator, and one which has a reputation, not just in Australia, but overseas, of being tough on the big end of town. That’s really important because we’re a country which has seen a rise in market concentration and an increase in markups over the last couple of decades.
I think the ACCC is doing great work under Gina Cass‑Gottlieb, but it needs strengthened powers, which is the reason behind a range of things we’ve done since coming to office. Increasing maximum penalties, banning unfair contract terms, the merger shake‑up and possibly a set of changes around non‑compete clauses, which impede workers from moving to a better job. We’re a pro‑competition government. Competition is vital in dealing with the cost‑of‑living crisis now and improving productivity in the long run.
TRILLING:
Yeah, we’ve discussed it’s going to apply to Coles, Woolies, Aldi and the Metcash‑owned IGA stores. But there has been some criticism today from the National Farmers Federation Horticultural Council about Bunnings being left off the list. Why weren’t they included in this code?
LEIGH:
Bunnings don’t sell food or groceries as defined by the code. I understand the concerns around plants that have been raised. The government’s certainly open to looking into that independently. But we didn’t believe that a food and grocery code is appropriate to a retailer which doesn’t specialise in food and groceries.
TRILLING:
Yeah, because Greenlife’s saying it misses an opportunity to extend some protection to those growers and ensure Bunnings as the dominant retailer of plants, doesn’t abuse its power.
LEIGH:
Yeah, and look, I’ve met with those suppliers of plants. I understand their concerns. I recognise their worries that Bunnings’ market power does leave those suppliers of plants at the mercy of Bunnings. But the Food and Grocery Code of Conduct isn’t the vehicle through which to solve every competition problem in the economy. It is primarily about dealing with supermarkets and ensuring that farmers and families get a fair deal. That’s what our announcement is about today.
TRILLING:
Andrew Leigh, as you can imagine, we talk about the price at the checkout, very often cost of living. And for the average shopper listening, I guess they’re going to be asking, will any of these changes ensure cheaper prices when they get to the checkout? How will that work?
LEIGH:
One of the things we’ve done in the funding CHOICE to do quarterly price monitoring is aiming to firstly inform shoppers as to where to get the best deal. And that information coming down last week is already being used by shoppers, making sure that they’re able to find the cheapest supermarket, but then also creating a kind of a grocery price Olympics. And so by doing it quarterly, we want the supermarkets to be trying to offer the best deal every time around. As with the ACCC, it’s going to look at issues around markups and supermarkets and whether there’s any unfair practices occurring there. We do recognise the pressure that Australian households are under, and that’s why from 1 July, every Australian taxpayer gets a tax cut, every Australian household gets a $300 energy bill rebate, and millions of low paid workers will get a government backed pay rise.
TRILLING:
Just back to the CHOICE report. When I was speaking to CHOICE last week, a lot of the response from listeners was, you know, if I don’t have an Aldi, which is 25 per cent cheaper than the big 2, I miss out. And also raising questions around the minimal difference between those big 2, it really was negligible. Is that evidence of price manipulation? Of price gouging?
LEIGH:
Well, Aldi’s 25 per cent cheaper, and then Woolies in Western Australia was 2 per cent cheaper than Coles.
TRILLING:
Which is pretty negligible, really.
LEIGH:
You might say that, but I know plenty of shoppers that go around with shopper dockets for getting a couple of per cent off. That does make a difference to a stretched household. But the key difference here is between the majors and Aldi. That does serve, I hope, as a wake‑up call for what’s happening with the majors and an impetus for people to shop where they get the cheapest deal. By shopping around, you don’t just help your family, you also put more competitive pressure on the system.
TRILLING:
We also saw that we’ve got very high prices here in WA through that CHOICE report. Do you think the mandatory code will do anything about bringing them down?
LEIGH:
The CHOICE grocery price comparison, I think, does put some pressure on there. As you say, we’ve got more expensive prices in the west than we see in the east coast, and it’ll be up to the supermarket chains to explain themselves on that front. Western Australia is a substantial market and so I want to see the supermarkets offering the very best prices right around the country.
TRILLING:
Dr Andrew Leigh, thanks for your time.
LEIGH:
Thanks, Joanna.