Coalition developing ‘big stick’ law to rein in Coles and Woolworths

Peter Dutton’s opposition is working on a “big stick” law that would threaten supermarket giants Coles and Woolworths with break-up powers for anticompetitive behaviour as it seeks to put the cost of living front and centre heading into a federal election.

As Coalition backbenchers put pressure on their party leaders to take on big business, shadow treasurer Angus Taylor and Nationals leader David Littleproud are in advanced talks on new divestiture laws that aim to empower consumers against Australia’s supermarket behemoths.

Nationals leader David Littleproud, Opposition Leader Peter Dutton and shadow treasurer Angus Taylor.Credit: Alex Ellinghausen

The plans, confirmed by three senior Liberals who did not want to be named because precise details have not been agreed and are subject to change, are likely to include court-enforced divestiture of assets as a last resort to act as a strong incentive for supermarkets to act in consumers’ interest.

The laws would focus only on supermarkets rather than economy-wide powers, which the Coalition is worried would spook the private sector. They would be modelled on similar narrowly defined laws in the US and UK.

“We enforced the same rules in the energy market. The laws were never actually used, but the spectre of the ‘big stick’ kept prices lower, so there is a good case to be made for supermarkets,” one Coalition source said.

The looming policy announcement represents a win for the National Party, which has campaigned for the laws for years, and sharpens the political contest over living standards with Prime Minister Anthony Albanese, who has ordered a probe into supermarkets but has described break-up laws as belonging in the old Soviet Union.

Nationals senator Matt Canavan.Credit: Rhett Wyman

In a sign of the antipathy towards corporate Australia within Coalition ranks, former minister Matt Canavan will cross the floor to vote for a Greens bill allowing the break-up of supermarkets, banks and other mega-firms.

Dutton told colleagues on Tuesday that the opposition should not be lending legitimacy to a Greens policy that he believes lacks guardrails. However, Canavan, a former minister turned prominent populist backbencher, said he did not care which party put up the proposal.

“I care about the small businesses and farmers that get screwed by unethical and unrestrained corporate conduct,” Canavan said.

Canavan’s rhetoric is representative of a growing cohort of influential Coalition backbenchers – including former minister Keith Pitt and economics committee deputy chair Garth Hamilton – putting pressure on Dutton to live up to his repeated claim that the Coalition is now the party of the working classes.

Garth Hamilton (right).Credit: Alex Ellinghausen

The main private sector lobby groups, whose positions often align with the Coalition’s, are vehemently opposed to divestiture laws.

Dutton signalled his willingness to brawl with corporates on issues of cultural concern when he backed a boycott of Woolworths after it stopped selling Australia Day merchandise, but the opposition is yet to release economic policies pitched at cash-strapped voters.

“We must continue to put the interests of the Australian people above those of the big banks and supermarkets, and our policies going into the next election should reflect that,” Hamilton said.

There is growing momentum for new powers to counter the market dominance of supermarkets, which have been accused of price gouging during the inflation crisis. Executives have repeatedly denied the charge and claimed higher production costs were leading to higher store prices.

Australian Competition and Consumer Committee (ACCC) chair Gina Cass-Gottlieb indicated to a Senate estimates committee last May she was supportive of divestiture powers for the Federal Court.

The National Farmers Federation and the Business Council of Australia are opposed to forced break-up laws.

“Experts looked at this policy most recently in 2015 and found it would negatively impact consumers, so this Greens bill could cause prices to be more expensive,” Business Council of Australia chief executive Bran Black said last week.

Earlier this year, Labor asked the ACCC to examine the difference between the prices received by producers at the farm gate and those paid by consumers at the checkout.

“There would be quite a loss of economies of scale,” he said.

“However, the existence of the power is likely to have a big effect on business behaviour generally. It’s a huge stick, and a big stick is needed to make some parts of the [Competition and Consumer] Act work more effectively.”

“Business tends to not take too much notice of section 46 [a law stopping firms from taking advantage of market dominance]. But if there is a chance of divestiture it would make a huge difference,” he said.

Woolworths were contacted for comment. A Coles spokeswoman referred to the position of the Australian Retailers’ Association, whose chief executive Paul Zahra said last week: “Large supermarkets operate with high fixed costs and intricate supply chains. The most likely outcome of any forced divestment would be to disrupt the economies of scale retailers have painstakingly built.”

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