ALP supports supermarket duopoly against Turnbull government’s new ‘Effects Test’

Posted by AFN Staff Writers on 25th July 2016


Controversy still surrounds the introduction of the ‘Effects test’ with the Labor Party Opposition spokesperson Andrew Leigh criticising the Australian Competition and Consumer Commission’s (ACCC) chairman, Rod Sims, for supporting the Effects Test.

During the 2016 Federal Election campaign, the Liberal-National Coalition government led by Prime Minister Malcolm Turnbull promised it would introduce the Effects test to strengthen legislation to stop big businesses abusing their market power.

The Effects test would change Section 46 of the Competition and Consumer Act which currently stipulates that to be found guilty of misuse of power, a business must have planned to and acted in a way that misused its power in an anti-competitive manner.

Introducing the Effects test would change the law so that the Australian Competition and Consumer Commission (ACCC) would only have to prove the large business acted in an anti-competitive manner. It would not have to prove the large business had the intention to misuse market power.

The Australian Labor Party’s Andrew Leigh, Shadow Assistant Treasurer, has however criticised comments made by ACCC chairman, Rod Sims, to The Australia, in support of the test.

Addressing whether the test was about protectionism, Sims said that it was not and that many on the Liberal side of politics were for the test which he described as “rational policy”.

Speaking on ABC Radio, Leigh indicated the Australian Labor Party opposes the Effects test.  The ALP position is similar to the stance taken by ex ACCC Chairman, Graeme Samuel, who has said the Effects test could limit consumer access to cheaper groceries.

Productivity Commission speaks out against Effects test

The Productivity Commission has also criticised the Effects test saying it is unlikely to protect farmers from big food retailers like Coles and Woolworths.

In its draft report on the regulation of Agriculture in Australia, which the Productivity Commission released on 21 July 2016, it said:

“The introduction of an ‘effects’ test to section 46 is unlikely to shield farm businesses from intense competition in retail grocery markets”.

The Productivity Commission also said that shielding farm businesses from competition would also “not be in the interest of consumers.”

ACCC allows Metcash Home Timber acquisition bid

Meanwhile, the Australian Competition and Consumer Commission (ACCC) has announced it will not stop Metcash bidding to acquire Woolworths’ Home Timber and Hardware chain.

Metcash must however follow a court-enforceable undertaking which addresses concerns the ACCC had when the wholesaler first revealed its intentions to make an acquisition bid.

In the undertaking, Metcash stipulates it will not restrict independent hardware stores from acquiring products from non-Metcash sources or favour its own hardware stores over nearby independent stores.

Metcash already owns Mitre 10, the only other full-service wholesale option for independent hardware and home improvement retailer in Australia outside of Home Timber and Hardware.

ACCC Chairman, Rod Sims, said the decision not to oppose the Metcash bid was finely balanced, and one that the ACCC had given deep consideration to.

“We looked at the competition issues surrounding Metcash acquiring its only rival full-service wholesaler,” Sims said.

“We received significant feedback from independent retailers. The majority were supportive of the bid, but we also took on board feedback from others who expressed some genuine concerns.”

Early in in July, the ACCC invited interested parties to make submissions on Metcash’s then draft undertaking.

An independent auditor will be appointed to ensure Metcash meets its obligations outlined in the undertaking if it is successful in its acquisition bid.

In January 2016, Woolworths announced its intentions to sell or shutdown all of it home improvement investments, which include Home Timber and Hardware and Masters. The decision was made with Masters having lost more than AUD $600 million for Woolworths across its six years of operation.