JON FAINE:
Today the Abbot Federal Government announced a new arrangement, a voluntary code of conduct with Australia's supermarket giants. Coles, Woolworths and the Australian Food and Grocery Council will comply with a new code of conduct which has been brokered by the Minister for Small Business. Bruce Billson is the member for Dunkley in the Federal Parliament which covers, sort of based around Frankston. Minister Billson good morning to you.
BRUCE BILLSON:
Good morning to you John and your listeners.
JON FAINE:
Ah the code of conduct, what's in it?
BRUCE BILLSON:
Well essentially it's the big supermarkets have sat down with the Food and Grocery Council, recognised they need to nurture good standards of business conduct in that food and grocery supply chain where you have frankly two behemoth retailers dealing with quite a range of much smaller businesses, each trying to have a viable business in the way in which those relationships play out and how to avoid disputes and no surprises is what the code seeks to achieve.
JON FAINE:
How much carrot and how much stick do you use to deal with the two behemoths?
BRUCE BILLSON:
Well plenty of encouragement, if I can put it that way, with encouragement in "inverted commas." I made it clear to Coles and Woolworths that if they weren't going to act then the Government would. We always believe that an industry led solution is best. They know and understand the food and grocery supply chain far better than any elected member or official would and to understand that it's in their interest to have good, respectful, fair relationships with their suppliers who are very dependent on just a few outlets for their product and that can create quite an imbalance in the commercial relationship that in the worst case, may be exploited to the disadvantaged of a perfectly viable, reasonable smaller supplier Jon.
JON FAINE:
We'll come to the law in a moment and enforcing the law, but what have they voluntarily agreed to do?
BRUCE BILLSON:
Well essentially it's about the way in which they interact with each other, the conduct between the parties is what this focuses upon. Trying to be transparent, trying to make sure there's predictability in the commercial relationships where disputes are minimised. Also having an effective and quick way to resolve disputes Jon. As you know a smaller supplier in a dispute with a big customer on whom they are very dependent can find themselves in a lot of financial problems if disputes drag on. This is the framework that's been undertaken. We'll have a look at that because there are other participants in the supply chain and it needs to go through a regulatory impact process so that other stakeholders can see whether this is likely to be effective or not.
JON FAINE:
Yes but in specific terms, what have they agreed to do?
BRUCE BILLSON:
Well there's issues around what to do with shrinkage Jon. You know if there's stock that becomes out of date or is lifted from stores. Some arrangements, the supermarkets actually require the supplier to carry the costs for that even though they've got no control over the premises. Issues where there might be a change in the terms, the contract period, the payment arrangements, even the price. Some restraints on when they're imposed unilaterally and retrospectively. And also a process for discussing the way in which a supermarket might go about pursing its interests in a private label that might see a supplier who has a category leading brand being asked to not only supply that brand, but supply a home brand product at a much cheaper price and how those relationships will be negotiated.
JON FAINE:
What's wrong with just enforcing what used to be called the Trade Practices Act, now the Competition Consumer Commission's responsibility, and what's wrong with just saying to them look we are sick of this and we are going to prosecute you every time we see what we think is a breach.
BRUCE BILLSON:
Absolutely nothing wrong with that and that must happen, and is happening. As well, the ACCC has been pursuing a number of allegations of unconscionable conduct in the supply chain involving the major supermarkets. The major supermarkets have been obliged to provide a vast array of information that the Commission's evaluating and Rod Simms, the commission Chair, has indicated those investigations will near there conclusion at the end of this year and then a basis on which further action can be taken will be arrived at. In addition to that Jon, you'd be aware we've made a commitment to a root and branch review of the competition laws. This framework was largely settled over 20 years ago yet the economy has changed, the marketplace, the dominance of key players in key segments of the market has changed and we want to be sure that the toolkit, that legal toolkit that you were referring to, is fit for purpose for the current and emerging economy. So there's three lots of work going on simultaneously Jon to tackle this issue.
JON FAINE:
So you think when all of this is done and dusted and introduced and working that the two giants, Coles and Woolworths, will still be the giants?
BRUCE BILLSON:
Yeah I think they will continue to be giants. What we are asking them to, well what we are asking of them is ah giants need to tread carefully. The code recognises that even the supermarkets understand that with a market share of about 80 per cent in fast moving consumer goods, they are behemoths, they do weld enormous market power and they understand that they need to be extra thoughtful and careful in the way in which they exercise that power so that their not using market muscle to squeeze out or to damage other businesses that should be able to compete on merit. We want to see efficient businesses big and small succeed and prosper and we want the legal framework to support that and that's what the root and branch review's about. We want the commission to utilise the toolkit it currently has available, notwithstanding some areas of deficiency. And then we want to make sure that the behaviour, the conduct between the parties, is guided on the basis of best practice and that's what the code's about.
JON FAINE:
But my question was directed I suppose Minister, at the almost, well is it a sign of failure if these reforms if at the end of it you still end up with two absolutely huge, dominant players, just making it a little harder for people to work out what they are doing to maintain their market dominance.
BRUCE BILLSON:
Yeah it's, look, we're not in the business of breaking up businesses and that's certainly nothing that the government's contemplating. What we are doing is saying to these very big businesses you can aspire to be very big and powerful but you need to be very responsible in the way in which you exercise that market power. And that's why that three pronged approach that I touched on Jon is what we think is the best way to progress these matters.
JON FAINE:
I suppose my concern is that, and I'm sure it's mirrored and there are many text messages and talkback callers waiting to speak as well saying the same thing, that this is tinkering around the edges rather than dealing with the fundamental issue which is one of the fact that they have just got too big.
BRUCE BILLSON:
Yeah I wouldn't accept that this is, well I wouldn't accept that this is tinkering around the edges. This tackles the question of conduct and the way in which the supermarkets and their supply chain interacts. What I would add though is it's not the only piece of work we are pursuing. The ACCC is looking at what it can do with these allegations of unconscionable conduct using the current law and as you would know Jon when the Hilmer review was implemented and the broad framework of the law that we have today was introduced, it was thought to achieve certain things – the misuse of market power provisions, which thought to be omnipotent and able to address many concerns yet through court hearings and determinations we've found it's a hunting dog that won't leave the porch in some cases Jon. It looks powerful, it looks like it might snarl but at times there's behaviour that we would have thought the law would have captured. But it's been found to not have the utility to capture, that's why there's the root and branch review of the competition laws. So there's the code dealing with the conduct, the ACCC's investigations currently about allegations of unconscionable conduct using the current law and then there's the bigger question about whether the legal toolkit is fit for purpose and that draws from our learning's with the way in which the current law's being utilised and how its operated and whether its achieving the policy objectives that people are hoping for.
JON FAINE:
I've got a new one to add. Lap dog, watch dog and now the hunting dog that doesn't leave the porch. Mr Billson that's handy thank you. We'll hand over to talkback callers now and thank you for your time this morning.
BRUCE BILLSON:
Good to speak with you Jon.
JON FAINE:
And maybe when if we speak, say in a year or so from now, we'll see whether in fact anything has changed.
BRUCE BILLSON:
Well let's come back a bit earlier in the new year and see how those ACCC inquiries go.