Is There a Clearer Distraction?
Australia is 18 months away from the next federal election, so brace yourself for more blame-shifting, but hopefully nothing as absurd as this.
Commentary
Australia is 18 months away from the next federal election, so brace yourself for more blame-shifting, but hopefully nothing as absurd as this.
The government and various allies in the Green/Left establishment have been complaining for over a year about supermarket “price gouging.”
This claim is baseless, as Coles and Woolworths only make about 2.5 cents for every dollar of stock they sell. But even if it were true, how would you address it?
A rational policymaker would aim to lower margins and cut costs by increasing retail competition, encouraging productivity improvements, negotiating lower rents with landlords, and securing better deals with suppliers to reduce the cost of goods.
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However, the interim report is not suggesting this approach. Instead, Mr. Emerson wants retailers to pay suppliers more while keeping everything else the same.
How does that lead to lower prices?
In fact, the review won’t significantly change the situation for major retailers at all.
- The Food and Grocery Code of Conduct should be mandatory for all retailers with a turnover of $5 billion or more.
- Maximum penalties for breaching the code should be 10 percent of turnover (greater than $500 million based on turnover).
- A complaints process for suppliers with confidentiality.
- Resolution and mediation process for disputes, with supermarkets encouraged to pay up to $5 million to resolve disputes.
- Minimum standards that cannot be contracted out of.
All retailers with a turnover of $5 billion or more already agree to follow a voluntary code that provides almost all of these provisions without the excessive maximum fine.
A binding code voluntarily entered into is essentially mandatory unless one party decides to withdraw, which is not the case here.
If such a withdrawal were to occur, then a mandatory code might be necessary, but currently, it seems unnecessary.
Furthermore, a $500 million fine is rarely justified. In cases of power imbalances, we are talking about small suppliers, not those whose losses due to unethical practices could reach 10 percent of a retailer’s turnover.
The prime minister tried to navigate this issue by stating to ABC News that:
“Clearly we are signaling the direction in which Dr. Emerson is headed,” Mr. Albanese said.
“This work is all about how we make our supermarkets as competitive as they can be, so that Australians get the best deal possible, whether they be the providers or, of course, the consumers at the check-out.
“And this recommends the code be made mandatory with very heavy penalties for major breaches.”
