Business warns against Greens, Nationals push to break Coles, Woolworths stronghold

Big business has warned of the ‘negative’ effects of a fresh push to break up the supermarket giants.

Business groups say the Greens’ plan to break up major supermarket chains found to be abusing their market power would have a “chilling effect” on the economy.

Under a new Bill to be introduced by the Greens on Wednesday, Australia’s consumer watchdog would have the power to ask the courts to split up supermarket giants and crack down on duopolies.

The divestiture legislation would allow the Australian Consumer and Competition Commission to break up powerful corporations and if passed, the likes of Coles and Woolworths could be forced to divest assets that are “misusing their market power to inflate prices, exploit their supply chains, or keep out competition”.

But the Business Council of Australia said the Bill could potentially have serious unintended consequences that could result in consumers “paying more, rather than less”.

Business Council chief executive Bran Black said. the Greens’ Bill could have a ‘chilling effect’ on the economy. Picture: NCA NewsWire / Martin Ollman

BCA chief executive Bran Black pointed to the last three major competition reviews, conducted between 1993 and 2015, all considered divestiture.

But they stopped short of recommending it, warning of the “negative flow on effects”.

“Given this Bill’s economy wide reach, it could have a chilling effect on business investment and jobs across Australia, at a time when we need to focus on growth and productivity,” he said.

“Policies should not be rushed, particularly if they could negatively impact consumers and the unintended consequences risk business investment and growth.

“This Bill puts the cart before the horse given the nine supermarket inquiries underway. “We should let those inquiries run their course and then discuss any policy changes and consult on them properly so consumers benefit and jobs are protected.”

Professor Allan Fels has long been calling for Australia to acquire divestiture powers. Picture: NewsWire

Former ACCC chair Allan Fels, referring to the success of similar laws in the US, said divestiture powers had “always” been missing from Australia’s competition law.

“It’s been missing not for reasons of economic logic – the economic logic is extremely strong,” professor Fels said.

“It’s been missing because there hasn’t been a political willpower of governance to do it, in the face of big business opposition.”

He said the time was right “now” to change the rules.

“There’s been a step up in the degree of concentration in the Australian economy … Concentration is increasing and the amount of competition is declining,” he said.

Nationals Leader David Littleproud has flagged he could support the Greens’ Bill. Picture: NCA NewsWire / Martin Ollman

The Nationals have flagged they could support the Greens’ Bill, with leader David Littleproud saying the laws would act as a powerful deterrent to force supermarket chains to do the right thing.

“I think we’ve gotten to a juncture now where protections need to be given to farmers and to consumers,” he told reporters.

“We want to work to make sure we get the architecture right and if we don’t get it right we miss out on the opportunity to get that protection.”

While supporting most of the Greens proposal, Mr Littleproud said he wanted to see a grocery code of conduct made mandatory for grocery retailers and tighter regulations focusing on supermarket power.

“There are some real, granular issues that need to be addressed with supermarket power and market dominance,” he said.

Greens senator Nick McKim will introduce a Bill that, if passed, would allow the ACCC to break up duopolies. Picture: NCA NewsWire /Brendan Beckett

Under the Greens bill, the ACCC could apply to the courts for a divestiture order that could either force the sale of a suite of specific stores held by Coles or Woolworths, which would then have to be sold to a competitor or an international operator wanting to enter Australia; or increase competition within their supply chain.

Economists say the mere existence of the powers would serve as a deterrent against bad behaviour, and would protect consumers.

Greens’ economic justice spokesman Nick McKim said Australians were sick of being ripped off by Coles and Woolworths, that he said had “had it their way for too long”.

“We need to stop supermarket corporations ruthlessly using their market power to gouge prices while raking in billions of dollars in profits,” Senator McKim said.

“Giving our courts and competition regulators the power to smash the supermarket duopoly will help rein them in.

“This isn’t a controversial or radical proposition. The UK has this power, and the US has been using it for well over a century.

“The market domination of Coles and Woolworths gives them power to crush farmers, squeeze out competition, and shaft their customers.”

The implications of the Bill – if it were to pass – go beyond just the supermarket giants, and could change the way banks, telcos and energy companies operate.

There have been growing calls for the government to break up the supermarket duopoly. Picture: NCA NewsWire / Max Mason-Hubers

The Greens will seek support from all sides of politics for the bill.

Earlier, Energy Minister Chris Bowen dismissed calls to grant the ACCC tougher powers and said Labor was committed to following a “normal, careful” process.

“The treasurer has commissioned a review of supermarkets,” Mr Bowen said.

“We’ll go through things in the normal, methodical, careful way – not the sort of haphazard, National Party way … It’s not something we’re contemplating.”

The Prime Minister earlier this year said he supported a push to tackle supermarket prices, he has rejected the idea of forcibly breaking up the two major chains because Australia is “not a Soviet country”.

Economists say divestiture powers would act as a deterrent against bad behaviour. Picture: NCA NewsWire / Naomi Jellicoe

Jeremy Griffith from the National Farmers Federation’s Horticultural Council said it was “common sense” to at least have the power to break up duopolies on the table, saying the laws would serve as a “ very powerful deterrent to poor behaviour”.

Mr Griffith said all sides of politics should at least agree that duopolies are bad for the economy.

“I think the Australian public would be surprised that the government doesn’t have the power already in place,” he said.

“It doesn’t matter where you sit on the political spectrum … duopolies are not in the economy’s interest, and they’re not in the public’s interest.”

Assistant Competition Minister Andrew Leigh did not respond to direct questions about divestiture power, pointing instead to the government’s work on improving supermarkets’ pricing practices elsewhere.

“The government has charged former competition minister Craig Emerson with reviewing the Food and Grocery Code of Conduct, we’ve tasked the ACCC with a review of the supermarkets, and we are funding CHOICE to do quarterly price monitoring, ensuring that consumers know where the best deal is available,” Dr Leigh said.

“Since coming to office, the government has increased the penalties for anti-competitive conduct, banned unfair contract terms, and set up a Competition Task Force in Treasury which is actively considering issues such as reviewing Australia’s merger laws.”

Originally published as Business warns against Greens, Nationals push to break Coles, Woolworths stronghold