Allan Fels: Divestiture laws would be “a useful part of their armoury”

The senate inquiry into supermarket prices heard on Monday that Australia’s competition watchdog should be given divestiture powers to break-up businesses.

Australia’s competition watchdog should be given divestiture powers to break-up businesses with too much market power, former Australian Competition and Consumer Commission chairman Allan Fels says.

Professor Fels, who led the ACCC between 1995 and 2003, told a Senate inquiry into supermarket prices on Monday that divestiture laws would be “a useful part of their (ACCC’s) armoury”.

He said recent history in the US showed that when divestiture laws were used with discretion, they had a positive effect on employment and market expansion.

“In the home of free markets, the United States, divestiture is a standard, accepted power. It’s a normal instrument occasionally used. It’s a form of deregulation, it generally expands markets, employment (sic) that’s been the experience of lots of breakups. In Australia we’ve broken up gas and electricity and that’s led to an expansion,” he said.

“The fallacy about the loss of jobs is that it focuses on the current monopoly. The current monopoly may have a decline in jobs.”

Professor Fells said he was surprised former Labor minister Craig Emerson did not look into the merits of divestiture in his interim report into the Food and Grocery Code of Conduct, which was made public last week.

His support for new legislation for powers to break-up big businesses comes shortly after ACCC boss Gina Cass-Gottlieb said divestiture powers “would be useful”.

Vocal advocate and Nationals Party leader David Littleproud said it was troubling the federal government wasn’t interested in exploring the issue.

“When you have these eminent Australians telling us a policy direction that would be useful but a government that’s ignoring it, it’s out of touch with what farmers and consumers are experiencing,” Mr Littleproud said.

Professor Fels said Australia was unlike many similar OECD countries that had divestiture laws, which he blamed on political rather than technical reasons.

He said he was broadly supportive of Greens Senator Nick McKim’s proposed divestiture legislation “to be occasionally used”.

Secretary of Australian Retail and Fast Food Workers Union Josh Cullinan told the inquiry the union was supportive of divestiture powers.

“The only reason that makes sense to us about why the Labor Party would not be supporting divestiture is because their largest donor and funder has said no,” Mr Cullinan said.

The inquiry heard that former Labor leader Mark Latham wanted to pursue divestiture powers but was blocked by powerful Labor ministers aligned with the rival union for retail, fast-food and warehouse workers.

The National Farmers’ Federation has remained relatively quiet on the issue.

NFF chief executive Tony Mahar told The Weekly Times it was working through its position on the issue.