ANDREW LEIGH:
Good morning everyone thanks very much for coming along on a beautiful sub‑zero Canberra morning. My name is Andrew Leigh, the Assistant Minister for Competition.
Australia’s supermarket sector is one of the most concentrated in the world. The top 3 supermarkets control three-quarters of the market. With great power comes a responsibility to do the right thing by consumers. Last week, the Albanese government announced price monitoring which we will fund CHOICE to do grocery price comparisons every quarter. That grocery price comparison is appropriate in order to ensure that shoppers get the very best deal. We’ve tasked the Australian Competition and Consumer Commission to do a deep dive into supermarket pricing, to make sure that supermarkets provide a fair deal.
We’ve heard from many suppliers to supermarkets that they feel left out in the cold. And that’s why we’ve asked Craig Emerson, one of Australia’s best economic policy brains, a former competition minister, to look at the Food and Grocery Code of Conduct. I’m here today with Murray Watt, the Agriculture Minister, and Craig Emerson, who has conducted this important review, to announce the Albanese government will be accepting all of Craig Emerson’s recommendations.
That means that a Code set up by the Liberals and Nationals to be voluntary, without appropriate penalties attached, will now have substantial penalties associated with breaches. We know that large firms don’t just squeeze their consumers, they squeeze their suppliers too. We’ve heard too many stories about the suppliers not getting a fair deal. This is about a fair deal for families and a fair deal for farmers. The Albanese government is committed to a more competitive and dynamic economy. We understand the benefits that competition brings to the economy. And I’m really pleased now to hand over to Craig Emerson to talk about his important report. And then to Murray Watt to wrap up.
CRAIG EMERSON:
Well, thank you, Andrew and thanks, everyone for braving the Canberra winter on a brilliant day. I was very encouraged that the government responded so quickly and decisively to the recommendations of the review that I conducted with very, very strong support from Treasury officials. There are 11 recommendations, the government has accepted all of those and effectively, it means that what was a voluntary code and an ineffective code is now going to be very effective, because it’ll have the strongest penalties of any code of conduct in Australia.
I had to look at whether the voluntary code was doing its job, it wasn’t, it had no penalties and there were no disputes raised after 2021. So I pretty quickly came to the conclusion that it wasn’t effective, that we needed effective penalties and provisions in the code, and that’s what I’ve recommended. So what it really means is that the supermarkets will need to treat their suppliers respectfully, and not use that bargaining power, their superior bargaining power, the muscle that they have particularly over smaller suppliers. And the point of that is to enable the small suppliers to be able to invest with confidence in the future, without worrying that they’ll basically be clinging on by their fingernails for the rest of their time in the business. That means that they can invest in cost saving devices, the latest technologies and improve the quality where they have a capacity to do so.
So that’s really good for the suppliers. But in the same way it’s really good for the shoppers at the supermarkets because they get lower prices and higher quality. So a good outcome for Australia’s suppliers and Murray Watt will talk about that a little bit more when I finish my remarks. I do want however, to thank Coles, Woolworths, Aldi and Metcash for agreeing to a groundbreaking set of arrangements whereby they have agreed that if we have independent mediation and arbitration, they will be bound by the outcome of that with a payment, if it was in favour of the supplier of up to $5 million, which is a lot of money for a small supplier. Under the Code they don’t have to do that, only the courts can issue or decide on these matters. But they have voluntarily decided to do that. So maybe that will be the groundbreaking event that will allow a better relationship. But even better, let’s not allow it to get to a dispute, let us get into a situation where we have a much improved relationship between those powerful supermarkets and the suppliers who are small and vulnerable. So thanks very much to the government for accepting all of those recommendations so quickly. And I’ll now hand over to Murray Watt.
MURRAY WATT:
Well, thank you very much, Craig. And can I really put on record my gratitude to Craig, as the Australian Agriculture Minister, for the work that he’s done, to really listen to the concerns of farmers, processors and suppliers to our supermarket chains, and to actually make some very concrete recommendations for fixing these problems. Craig actually undertook 4 different roundtables with representatives of users and processors, and listened first hand to complaints of people, and has now used that knowledge to come up with some excellent recommendations. So thank you for the great work that you’ve done. As Andrew has said, what today is about is about making sure we deliver a fair outcome for farmers and for families right across the country. For too long, we’ve seen supermarket chains take advantage of suppliers, our small farmers right across the country, not provide them with a fair price, but then actually charge consumers much more than what they’re actually paying farmers. I remember last year, we were all shocked when we saw livestock prices falling dramatically, but prices weren’t falling at the supermarket for consumers. And people were rightly asking why that was the case and why they were having to pay so much when farmers were getting so little. And that’s what these recommendations that Craig has made and the government is accepting, will go to fix. The most important recommendations I think Craig has made are making the Food and Grocery Code mandatory rather than voluntary, dramatically increasing the penalties on supermarkets if they do the wrong thing, but also providing some avenues for farmers to make complaints without the fear of retribution that they have had up until now. I’ve lost count of the number of farmers that I’ve met in this role that have complained to me about the bad treatment they received from the big supermarket chains, but they’re too scared to take any action about it because they’re worried they’ll lose that contract. And the recommendations that Craig has made, allowing for anonymous complaints to the ACCC, mediation and arbitration, will go a long way to giving farmers the confidence they need to speak up for themselves if they are getting a raw deal. So again, congratulations to Craig, congratulations to Andrew for your leadership of this work. Today, we’re finally seeing some action that has taken too long, wasn’t taken by the Coalition government. And what we’re about is delivering that fair outcome for farmers and families.
JOURNALIST:
I remember when you started this review, chatting to you that day, and you doubted that it would actually lower prices for shoppers, has that changed?
EMERSON:
You know, my argument was that it offers a better deal for the suppliers, and that means that they can compete even at lower prices. Rather than just surviving on a day-to-day or month-to-month basis. I think I actually said that it can, but we had to see how the recommendations and the analysis come out. And I do feel confident that through the various mechanisms, including the one that Murray was just talking about the fear of retribution, you’re not going to make a complaint against the supermarket if you think you will lose a contract. So that access to the ACCC, its totally anonymous, the ACCC can then look at with whether this has been systemically bad behaviour. So I think the 11 recommendations together, give me confidence that it can. But in the end, there’s the pressure on the supermarkets to pass those cost savings on. And that’s why there are the other inquiries that are underway. The CHOICE inquiry is I think having an impact because we already found was that Aldi is 25 per cent cheaper than Coles and Woolworths, and then the ACCC itself is doing a price inquiry. So that’s directly related to the relationship between the supermarkets and customers.
JOURNALIST:
Of the recommendations, which one do you think is the most significant which one is going to scare these guys the most?
EMERSON:
Making it mandatory, but with really big penalties. So I would say this if the supermarkets behave properly, they shouldn’t be too worried about this because it’s designed to make them behave properly. So it’s not as if they will live in fear every day, just treat the suppliers decently and don’t put the suppliers in such a difficult position where they do fear through retribution that their products will be moved from a really nice spot on the shelf down the back of the aisle or delisted altogether. And that’s why Murray Watt said that opportunity that is now available will now be available for suppliers to make confidential complaints to the ACCC is definitely very important.
JOURNALIST:
And why are you not a fan of divestiture powers?
EMERSON:
Divestiture powers not are not a credible threat. Because if after year after year after year of deliberation in the court of the ACCC, the court decided that that was the best option. And it’s very difficult to even imagine that they’d say that’s the best option. And they said to Coles you’ve got to divest 100 stores. Anyone interested in buying 100 stores? Woolworths would say ‘Yeah, I wouldn’t mind buying 100 stores’. All you have done this shuffled the deckchairs around. Yeah, you would need a big new entrant to say they would come in and buy that. So it sounds kind of terrifying. But in fact, it would be completely ineffective and therefore not credible.
JOURNALIST:
Can you tell us which supermarket chains this would apply to and if there’s scope for that to be expanded?
LEIGH:
So this will apply at the moment, as the Emerson report outlines, to Coles, Woolworths, Aldi and Metcash. Costco at the moment has turnover of $4.6 billion. So if it grows, it would come within the scope of the Food and Grocery Code of Conduct and if Amazon began selling fresh produce and passed that $5 billion threshold it would come within scope too.
JOURNALIST:
And can you tell us how this will work in the parliament, do you have to introduce legislation? When will that happen, and do you know if you have the numbers yet?
LEIGH:
We have to introduce legislation, we would hope that the Liberals and Nationals would back us on this. They made the wrong call, frankly, to have this as a voluntary code. They set it up as a voluntary code and their review said it should stay as a voluntary code. It’s taken Labor to make the right decision and turn this into a mandatory code. And I hope the Liberals and the Nationals will recognise the error of their ways and back the necessary legislation.
JOURNALIST:
There have been some very big penalties that have been recommended by Dr Emerson do you imagine that they would be used frequently?
LEIGH:
I would hope they wouldn’t – just as the government hopes that none of the penalties in legislation are used. I’d hope that this leads to a change in behaviour. After all, that’s what farmers and suppliers most need.
JOURNALIST:
Do you think that if those penalties were already in place, the behaviour that we’ve seen from the big supermarket giants would warrant those fines already?
LEIGH:
I think if those penalties had been in place, we would have seen better behaviour by the big supermarkets. I hope the relationship between supermarkets and their suppliers improves as a result of this.
JOURNALIST:
And just a couple of different topics. Is Australia prepared for widespread avian influenza? Has enough been done to prevent it?
WATT:
Yes, I’m confident that there has. Obviously we’re disappointed to see a second farm in New South Wales have an infection and outbreak of avian flu. That second farm is not too far from the first farm that was infected in New South Wales. And they’re both within the control zone that the New South Wales Government declared. We’re working very closely with the New South Wales Government, as we are with the Victorian Government to bring these outbreaks under control. It is pleasing to see in Victoria, that the number of farms infected has remained at 7 for quite a few days now. So that gives us some confidence that in Victoria we’re bringing things under control. And similarly, we would hope to do so in New South Wales as well. But I’m being regularly briefed by my Department and each time I’m briefed, I say to them: is there anything more we can be doing? They assure me that everything possible is being done, and both the New South Wales and Victorian Government, I think, are doing a good job in managing these outbreaks.
JOURNALIST:
So don’t panic?
WATT:
Absolutely no need to panic. I know there’s a lot of stories around about egg supplies as well. But I’ve actually checked again this morning. On a national level, there is absolutely no risk of egg supply shortages. Of course, there are particular shops in particular places that might be having a little bit of trouble getting them from their usual supply chains. But there’s no need whatsoever for shoppers to be panicking about this.
JOURNALIST:
And just on another matter, will the government provide more funding to help live sheep exporters transition as recommended by the Standing Committee on Agriculture? Their report that was released on Friday.
WATT:
We will obviously give consideration to the recommendations of the Committee and I was pleased to see that they recommended that the legislation to phase out live sheep exports by sea, that that legislation should pass. The House of Representatives will now consider that legislation this week. We will obviously give consideration to the committee’s recommendations. But I would point out that already the government is putting on the table $107 million worth of taxpayer funds to assist an industry transition and industry that has been in decline for 20 years. Western Australia is now sending 90 per cent fewer sheep by sea, than it used to do. At the same time, we’re seeing a big transition towards onshore processing. That’s what we want to be able to support through this transition package. We want to make sure that we’re keeping jobs onshore rather than sending jobs offshore.