Business Council Warns Against Proposed Greens’ Bill to Break Up Supermarket Giants
In a move that has sparked heated debate, the left-wing Greens party has proposed a bill that would grant the Australian consumer watchdog and the courts the power to force supermarket giants Coles and Woolworths to sell their assets if they are found to be uncompetitive. The Greens argue that these supermarket behemoths have been using their market power to unfairly increase prices while raking in billions of dollars in profits. However, the Business Council of Australia (BCA) has issued a warning, stating that this bill could have unintended consequences and harm consumers by driving up prices.
The proposed bill, known as the divestiture power bill, aims to tackle the issue of the supermarket duopoly and rein in the power of Coles and Woolworths. If passed, it would give the courts and competition regulators the authority to break up these retail giants. However, BCA CEO Bran Black argues that this bill fails to address the root causes of the current issues, such as price transparency from farm gate to shelf, and it may exacerbate financial pressures and put jobs at risk.
Black’s concerns are echoed by various stakeholders, including the National Farmers Federation and the Australian Council of Trade Unions (ACTU). The National Farmers Federation opposes divestiture, emphasizing the complexity of supply chains in regional and rural areas. The ACTU has also rejected the idea, highlighting potential job losses.
Under the proposed bill, the Australian Competition and Consumer Commission (ACCC) could apply to the courts for a divestiture order, which would force Coles or Woolworths to sell specific stores to competitors or international operators looking to enter the Australian market. The bill also includes measures to increase competition in supply chains.
The Greens believe that this bill will discourage dominant supermarkets, banks, and energy companies from pocketing higher margins and instead compel them to pass on savings to customers. They argue that it is time to prioritize the interests of people over corporate profits and cite examples of other countries, such as Ireland, Italy, and the Netherlands, using divestiture power to boost local competition.
However, the BCA and other critics point out that the last three major competition reviews in Australia have rejected divestiture powers. They argue that such powers can have adverse effects on jobs and disrupt critical sectors, especially in regional and rural areas with complex supply chains. The Senate Economics Legislation Committee’s 2015 review concluded that court-ordered divestiture would pose significant economic risks and uncertainties for competition.
While the Nationals have surprisingly expressed support for the bill, with leader David Littleproud emphasizing the need to protect farmers and consumers, Prime Minister Anthony Albanese has dismissed the proposal, stating that Australia is not the Soviet Union. The position of the Liberal party remains unclear.
Amidst the debate, Graham Young of the Australian Institute of Progress argues that supermarkets should not be solely blamed for inflation and cost-of-living struggles. He suggests that the government’s injection of money into the economy during the pandemic is a significant factor. Young points out that food and non-alcoholic beverages have had a lower rate of inflation compared to other sectors like insurance and financial services, housing, transport, recreation and culture, and health.
Furthermore, Young highlights that Coles and Woolworths’ after-tax profits amount to only around 2.57 percent and 2.53 percent respectively, indicating that they are not excessively profiting from price gouging. He also notes that supermarkets themselves are victims of inflation, as most of their costs are fixed and they can only make limited adjustments to increase turnover and optimize pricing strategies.
As the debate over the proposed bill continues, it remains to be seen whether it will gain enough support to pass in the Senate. Both proponents and opponents recognize the need to address issues of competition, price transparency, and cost of living. However, they differ in their views on the most effective approach to achieve these goals while minimizing unintended consequences.
