Breaking Up Major Supermarket Companies: A Last Resort to Curb Rising Prices
Introduction:
There have been numerous complaints from consumers in Australia who are increasingly concerned about rising supermarket prices. In response to these concerns, the federal opposition in Australia is backing legislation to grant the government divestiture powers. These powers would allow authorities to break up major supermarket companies as a last resort in order to curb rising prices.
Divestiture Powers: A Last Resort:
Divestiture power is a measure that enables authorities to force companies to strip themselves of assets, such as stores and brands. The proposed legislation aims to give the government the authority to use these powers if necessary. However, opposition leader Peter Dutton emphasizes that divestiture would only be used as a last resort.
Supermarket Profits and Accusations:
Major supermarkets in Australia have been posting profits amidst a cost-of-living crisis, which has fueled accusations of price gouging and unfair deals with farmers. Both sides of the political spectrum have criticized these supermarket giants for their actions. Liberal leader Mr. Dutton and Nationals leader David Littleproud have expressed their intention to take a harder stance against these supermarkets to protect consumers and farmers.
New Measures and Penalty Powers:
As part of their plan, the Coalition intends to establish a new role for a supermarket commissioner who would address complaints from suppliers and farmers. Additionally, they plan to provide the Australian Competition and Consumer Commission (ACCC) with more tools and penalty powers. The ACCC would be able to issue infringement notices with fines of up to $2 million. Currently, the infringement penalties for supermarket brands are capped at $187,800 under the Albanese government.
Targeting Supermarkets with High Turnover:
The proposed policies would only affect supermarkets with an annual turnover of over $5 billion. This includes major players like Woolworths, Coles, Aldi, and IGA owner Metcash. The aim is to ensure fairness in the market by addressing the concentration of market share. Currently, Woolworths holds 37% of the market share, followed by Coles with 28%, and Aldi with 10%.
The Opposition’s Move and Concerns About a Centralized Economy:
The opposition’s decision to back divestiture powers for major supermarkets is a response to Prime Minister Anthony Albanese’s rejection of such measures. Albanese has likened breaking up major supermarkets to the Soviet Union’s forced asset sales. However, the opposition argues that this is about ensuring fairness in the market and protecting consumers and farmers. The Greens, who initially proposed divestiture powers, have been pressuring the Albanese government to support the move.
Unintended Consequences and Consumer Impact:
The Productivity Commission has cautioned against forcefully breaking up the Woolworths-Coles duopoly. They argue that such an action could have unintended consequences that would ultimately hurt consumers. Former chair of the commission, Michael Brennan, highlighted the importance of competition in the market. He noted that consumers often feel better off with major supermarket chains like Coles and Woolworths due to cheaper prices and a wider range of products.
Long-Term Effects of Breaking Up Major Corporations:
A long-standing debate surrounding the breakup of major corporations is whether it actually leads to sustained competition. The example of the forced breakup of Standard Oil in 1911 is often cited. Despite the breakup, the remnants of the company eventually merged back together, resulting in four major brands by the 2000s.
Conclusion:
The proposed legislation to grant divestiture powers to the government as a last resort to break up major supermarket companies has garnered support from Australia’s federal opposition. While concerns about rising supermarket prices and unfair deals with farmers are valid, there are concerns about unintended consequences and the long-term impact on competition. It remains to be seen how these proposed measures will play out and whether they will effectively address the issue of rising prices while maintaining a fair market for consumers and farmers.
