A not so clever approach

The federal government has now released its a, claiming they want a fair go for families and a fair go for farmers. But Labor’s supermarket code of conduct will likely inflate grocery prices, something consumers are already suffering in some areas.

10 April 2024

ALAN HAYES

 

THE Albanese government wants to make our supermarkets as competitive as they can be so Australians get the best prices possible. Yet reining in the power of Coles, Woolworths and their smaller supermarket rivals is likely to push consumer prices up, not down.

 

Former Labor minister Craig Emerson has concluded a review of the relationship between Coles, Woolworths and their suppliers, and recommended that the existing, voluntary, decidedly feeble code of conduct relating to that relationship be turned into a mandatory code, with stiff penalties for abuse of power.

 

Assistant Minister for Competition, Dr Andrew Leigh said “Following extensive stakeholder engagement, the interim report recommends the Code be made mandatory, with heavy penalties for major breaches.

 

“Currently, there are no penalties for breaches, and because the Code is voluntary, supermarkets can walk away from it at any time.”

 

The interim report notes there is a heavy imbalance in market power between the smaller suppliers and supermarkets, which warrants a strong and effective Code.

 

The report recommends that the mandatory Code apply to grocery retailers and wholesalers with revenue of $5 billion or more per annum, which would capture the current signatories – Aldi, Coles, Woolworths, and Metcash.

 

It found that smaller suppliers’ fear of retribution is a major obstacle to the use of the Code and makes recommendations to strengthen protections for complaints including new channels for making informal complaints and access to independent dispute resolution.

 

The Interim Report of the independent review led by Dr Craig Emerson will be out for consultation until 26 April 2024.

 

Emerson is no ‘slouch’ when it comes to competition: he passed the current Competition and Consumer Act when Labor was last in power.

 

The problem with this review, however, is the simple fact that it has little to do with the consumers aspect of competition; instead, it focuses on the near-monopsony power of Coles and Woolworths and their ability to leverage that against suppliers to force down their costs — reducing their ability to make a viable income. Of course, this is of little concern to the ‘Colesworth’ duopoly, who see profit above everything else – screw the supplier; screw the consumer.

 

Emerson rightly wants to tilt the balance back toward suppliers, so he proposes a much tougher regulatory framework for the big companies. No-one but them is likely to complain. This suits the Albanese Government’s big and broad competition reform agenda, which includes an ACCC inquiry into supermarket prices, a $1.1 million boost in funding for supermarket price monitoring by CHOICE and a comprehensive review of the nation’s competition policy settings with a focus on easing the cost of living for middle Australia.

 

But the Albanese Government’s ‘fairy-dust’ approach is the stuff of dreams. It’s unlikely in the extreme that the supermarkets don’t exploit their market power, but if the new code is effective for suppliers, guess who will pay? Suppliers getting a higher return from the supermarkets will, without doubt, be passed back onto consumers. So, the cost of living will continue to spiral.

 

And we call ourselves the clever country!