Over Christmas, the Prime Minister’s team had the brain wave that they needed to act on the cost of living pressures facing so many Australians. They needed to do something to help the PM’s flagging approval ratings.
Like the scene from Life of Brian, the obvious answer in politics when someone calls for action is to have an immediate discussion! The PM announced that he would conduct a review (yes, a review) of the pricing behaviour of Coles and Woolworths. That will fix it.
Never mind that this review was one that the Government had to do by law anyway. Under the previous government’s Food and Grocery Code of Conduct, a review was scheduled to occur this year. So the PM has not really taken any new action to address the cost of living. He wants credit for doing something that he had to do anyway.
Worse, the PM’s grocery review is a total stitch up that will do nothing to reign in the behaviour of the major supermarkets.
The PM has suggested that one action of his review could be to make the voluntary Code of Conduct mandatory. But Coles and Woolworths have already signed up to the Code and so this change would not impose any new obligations on them. In fact, it could help Coles and Woolworths by imposing new red tape on their smaller competitors.
Then we have the matter of the PM’s hand-picked author of this review. Craig Emerson is a smart guy. He is a respected economist. He has been the Trade Minister and Competition Minister in prior Labor governments. It is just that if you wanted to pick someone who would be unlikely to recommend anything that would seriously reign in the big supermarkets, he would be your guy.
Craig is a free market economist who has attacked suggestions to expand competition laws to protect small businesses and farmers.
When Craig was the Competition Minister, the Liberal and Nationals parties suggested that his unfair contract laws should be expanded to protect small businesses and farmers as well as consumers. In an article in *The Australian* at the time, Craig attacked this suggestion as “interventionist populism” and he claimed that it would increase interest rates for small businesses. It took the election of a Liberal-National Government to expand the unfair contract regime to small businesses and farmers and none of the scare mongering that Craig suggested has come true.
Craig also attacked the Nationals party for suggesting that we should have a divestiture power that would allow for large companies found to be engaging in anti-competitive behaviour to be split into smaller companies. He called this idea “zany” even though almost all other developed countries (including the US and UK) have exactly these divestiture powers in their competition laws.
Over the last decade the ACCC found that Coles and Woolworths had been engaging in what can only be described as a form of corporate blackmail to small businesses and farmers. In 2011, a Coles manager sent an email asking the household goods manufacturer, Oates, to make a payment of $326,590 for what Coles called a “profit gap”. Coles did not identify any contractual reason for this payment but threatened not “to work collaboratively with Oates for the next year” if Oates did not make the payment.
This incident, along with others, caused Justice Michelle Gordon to conclude that “Coles’ misconduct was serious, deliberate and repeated … Coles demanded payments from suppliers to which it was not entitled by threatening harm to the suppliers that did not comply with the demand. Coles withheld money from suppliers it had no right to withhold.”
Justice Gordon ordered Coles to pay a penalty of $10 million but in doing so she said that “The current maximum penalties are arguably inadequate for a corporation the size of Coles.”
There won’t be a serious change in the behaviour of Coles and Woolworths until there are serious increases in the penalties for this kind of conduct. Unfortunately, I do not think Coles and Woolworths are shaking in their boots in response to the PM’s confected outrage.
They only need to look at what happened when cost of living was a concern during the last Labor Government. Does anyone remember Grocery Watch? It was the Rudd Government’s farcical attempt to reduce supermarket prices by setting up a website! Well, they tried to setup a website. It was such a failure it was never published on the World Wide Web.
Oh, and who was the Minister responsible for the Grocery Watch debacle? None other than then Competition Minister Craig Emerson!
Do not hold your breath for grocery prices to fall any time soon under Anthony Albanese.
