Alicia Barry:
Retail and industrial conglomerate Wesfarmers has held its investor day, spruiking growth opportunities in its big brands like Kmart, OfficeWorks and Bunnings. CEO Rob Scott had a long‑standing commitment to appear on this program, but when we indicated we would include questions about Bunnings and its market dominance, the interview was cancelled.
The hardware giant was recently the subject of the ABC’s Four Corners program, which aired allegations of anti‑competitive behaviour and unfair treatment of suppliers. Competition is a key part of Assistant Minister Andrew Leigh’s portfolio. He joined me earlier. Andrew Leigh, welcome to The Business.
Andrew Leigh:
Thanks, Alicia. Great to be with you.
Barry:
Bunnings says it has 17 per cent market share. Experts say it’s much more. How concerned is the government about Bunnings market dominance?
Leigh:
Bunnings is clearly the big kahuna in the hardware market, and that’s happened through a steady process of growth and acquisition. It started off with just one store 30 years ago and now has hundreds of stores and billions in turnover and employs tens of thousands of people. So, Australians will see Bunnings in a whole lot of communities in a way that I guess in decades gone past, you’d see more Mitre 10s and Nock & Kirbys and the like.
Barry:
Regulatory scrutiny has been heaped on the big supermarkets recently. Why has Bunnings escaped the spotlight?
Leigh:
When we asked former Competition Minister Craig Emerson to look at the Food and Grocery Code of Conduct, he came back with a series of recommendations. But he didn’t recommend that we add hardware to that Food and Grocery Code because, as the name suggests, it’s focused around the big supermarkets.
We’ve also provided $30 million in additional funding to the competition watchdog, which allows them to look at misconduct across a whole host of sectors, which would include hardware.
Barry:
As you say, Bunnings is a large player. Should there be a separate code of conduct for the hardware sector?
Leigh:
Look, that’s not something we’re contemplating at the moment, but I’ll be interested to see where the Senate committee goes when it reports. And there’s also opportunities for the competition watchdog to look at issues that have been raised by suppliers. So, I hear anecdotally concerns among suppliers to Bunnings about payment times, for example. These are issues that can be addressed through the unfair trading practices extension that the government’s put in place.
We are a friend to small business. We do want small business to get a fair deal, and codes of conduct aren’t the only way we seek to achieve that. The increased penalties and the banning of unfair contract terms in our first term will be followed this term by a continued focus on competition reform led by the Competition Taskforce in Treasury.
Barry:
One issue raised in the Four Corners program was why Bunnings should be able to set up next door to rivals when it stops others setting up next door to it using exclusivity clauses. Should it be allowed to do that?
Leigh:
Well, one of the things we’ve done with states and territories and their planning and zoning rules is to ensure that they’re taking competition into account. That’s really critical as you know Alicia, because it makes sure that we get the most competitive outcome for Australian consumers.
We’ve set up a $900 million productivity fund for that work with states and territories, and among that work is the planning and zoning reforms which go directly to the issue you have asked about.
Barry:
Bunnings CEO, Mike Schneider declined an interview with the Four Corners program, and Wesfarmers boss Rob Scott has pulled out of an interview with this show. Do you think it signals a deliberate strategy to sweep this competition issue under the rug?
Leigh:
Look Alicia, I wouldn’t expect those eminent gentlemen to be commenting on my media appearances, and so I’ll do them the courtesy of not commenting on theirs. It’s up to them as to how they acquit themselves before the share market and the media.
Barry:
Well, both leaders shunned the Senate committee hearings into supermarket prices last year, sending mid‑level managers instead while counterparts sent heavyweights. Do you think that’s appropriate?
Leigh:
Well, again, that’s up to those companies to answer for who they send along to particular inquiries. My job as I see it, is to engage with the business community, with the Australian experts, with consumer groups in order to get the very best deal. And getting more voices into the competition conversation has been critical.
Barry:
As you say, competition policy will be a central feature for the government this term. What is that going to look like for Bunnings?
Leigh:
In general, we tend to look at reforms which affect firms right across the board. That’s because the competition problem doesn’t just affect one or 2 sectors, it really shows up in a lot of different areas. Over the last generation, Australia has seen an increase in market concentration, an increase in markups and a fall in job switching. We’re also working with the states and territories on a revitalised National Competition Policy. So, there’s a lot at stake from getting competition right and getting more dynamism in the economy.
Barry:
Andrew Leigh, thank you so much.
Leigh:
Thank you, Alicia.