Opposition Introduces Proposed Laws to Address Grocery Industry Oligopoly

In an effort to address market concentration and anti-competitive practices in Australia’s grocery sector, National’s Leader David Littleproud and Shadow Treasurer Angus Taylor introduced new legislative initiatives in Parliament on Nov. 4.

Littleproud, who also serves as the shadow agriculture minister, has put forth a new Bill to strengthen consumer protections and divestiture powers. Meanwhile, Taylor has recommended amendments to the Competition and Consumer Act with a focus on divestiture orders as a remedy for violations.

A divestiture order is a legal directive that requires a corporation to reduce its market power or share in that market.

Both proposals aim to enhance market fairness and accountability, reflecting lawmakers’ increasing concerns about the influence of major supermarket chains—Coles and Woolworths—on consumers and farmers.

Increase in Penalties

Littleproud’s proposed bill aims to establish a framework to increase penalties for supermarket misconduct.

It includes introducing substantial infringement notices of $2 million, which the Australian Competition and Consumer Commission (ACCC) could levy for breaches of the grocery code.

“Why wouldn’t we give the ACCC the tools that they want,” he said.

He further elaborated that the goal is to incrementally raise penalties up to $10 million or 3 percent of the company’s financial gain from misconduct, with the specific amount determined by a court.

However, the ACCC would only pursue a case in court if it believes it can secure a penalty exceeding $1 million.

Littleproud emphasized that the primary objective of the framework is to rectify the system.

“This is about fairness and transparency. This isn’t about fixing prices.”

Introducing Divestiture Orders

In conjunction with Littleproud’s initiatives, Taylor’s amendments prioritize the introduction of divestiture orders as a solution for breaches of Section 46 of the Competition and Consumer Act, which deals with the abuse of market power.

He indicated that if a breach of Section 46 is found by a court, either a relevant party or the ACCC can request a divestiture order within 18 months of discovering the violation.

This approach would act as a last resort for severe market misconduct, complementing other penalties that can be enforced along the way.

“We believe in providing a structural solution to a structural problem,” he added.

Woolworths, Coles Control

Discussing the oligopolistic behaviors in the grocery sector, Taylor referenced research from the e61 Institute, which highlights that supermarkets have a significant presence in local markets, especially in regional areas, resulting in high levels of customer inertia.

According to the data, 33 percent of Woolworths customers would choose another Woolworths store as their preferred alternative shopping location, underscoring the lack of genuine competition.

Taylor also cited the ACCC’s findings that Woolworths and Coles collectively dominate over two-thirds of the national supermarket sales.

In a 265-page interim report published on Sept. 27, Woolworths and Coles were identified as major players in an “oligopoly.”

Moreover, the supermarket giants were found to have eroded consumer trust, with nearly half of the respondents expressing grievances about prices, up from 17 percent in 2008.

Taylor mentioned that the merger regime intended to prevent creeping acquisitions within the supermarket sector has proven ineffective, emphasizing the necessity for divestiture penalties.

“This will be a crucial tool for the ACCC to combat anti-competitive conduct and ensure fair treatment of consumers, suppliers, and small businesses,” he stated.

The ACCC has previously taken Woolworths and Coles to court for deceiving consumers, accusing them of violating Australian Consumer Law by making misleading “discount pricing” claims on numerous everyday products.

Prime Minister Anthony Albanese supported the competition watchdog’s legal action, asserting that customers should not be treated as “fools.”

Creating a Supermarket Commissioner

An integral aspect of Littleproud’s bill is the establishment of a Supermarket Commissioner to address farmers’ concerns regarding their treatment by major supermarket chains.

Many farmers have reported mistreatment but have refrained from speaking out due to fears of retaliation and losing supply contracts.

“We have heard inquiry after inquiry of farmers coming forward of the mistreatment of these two supermarkets who controlled the market,” Littleproud emphasized.

This proposed commissioner will offer a confidential channel for farmers to voice their grievances, allowing for a thorough examination of supermarket practices. If necessary, complaints can be escalated to the ACCC for broader investigations, ensuring greater transparency and accountability in the supermarket sector.

Government’s Approach to the Challenge

In October, the Albanese government unveiled a bill to reform merger laws, signaling a significant change in competition policy after nearly five decades.

Presented by Treasurer Jim Chalmers on Oct. 10, the legislation aims to differentiate between mergers that impede competition and those that deliver genuine economic benefits.

Critical reforms include empowering the ACCC to conduct more rigorous assessments of mergers, with expedited approvals for transactions deemed non-threatening to competition, now cleared within 30 working days.

Additionally, the reforms introduce a mandatory notification system requiring businesses to inform the ACCC of certain mergers before proceeding, preventing potentially detrimental mergers from slipping through unnoticed.

The legislation will also focus more closely on mergers that could establish or reinforce significant market power, subjecting them to thorough scrutiny while expediting beneficial mergers.

Lastly, a public register of all notified mergers will be established to enhance transparency in the marketplace.

On Oct. 1, the government announced an increase in funding for the ACCC, totaling approximately $30 million, to empower a crackdown on deceptive and misleading pricing practices in the supermarket and retail industry.