Australian Government to review Competition Laws for Food and Retail sectors

Posted by AFN Staff Writers on 4th November 2013

The Australian Government has announced it will undertake a ‘root and branch’ review of competition laws and how these relate to the food and beverage manufacturing and retail sectors, according to Bruce Billson, Federal Minister for Small Business.

Speaking at the Australian Food and Grocery Council’s (AFGC) Leadership Forum in Canberra last week, Mr Billson said that many of the current issues relating to competition policy in the food industry involved the market position of “major players in the market”.

“Some of the most contentious issues in the sector go to questions of buyer power and how big players use it when dealing with other businesses in the supply chain,” Mr Billson said. “Grocery processors, food manufacturers and primary producers commonly express concerns about an imbalance of bargaining power between the majors and themselves,” he said.

Reduced prices good, but need to think long-term

Mr Billson said that while intensified competition between the two major supermarket chains had reduced grocery retail prices, there were concerns that those reductions “come at the expense of suppliers and impact on the longer-term durable benefit to consumers”.

“We have to ask ourselves: Will these price and market pressures impact on the viability of the food and grocery industry over the long term, and will they stifle innovation and investment by suppliers? And will this result in higher grocery prices in the longer term?” Mr Billson said.

Mr Billson said these issues had been discussed in a number of spheres, including Parliamentary committees and industry reports. He also highlighted the current investigation by the Australian Competition and Consumer Commission (ACCC) into complaints about “anti-competitive and unconscionable conduct” by the supermarkets towards their suppliers.

“Some of the alleged behaviours by supermarkets may not necessarily be breaches of the competition laws,” Mr Billson said. “At the same time, this does not mean that the status quo is necessarily delivering the most efficient or optimal outcomes in the market,” he said.

“If unduly harsh bargaining practices are being used, they could, indeed, reduce incentives for suppliers to invest and innovate. It is these questions marks over competition policy which we want to examine,” Mr Billson said.

Review presents opportunity for reform

Mr Billson said the Government’s ‘root and branch’ review of Australia’s competition laws and policy presented a “great opportunity for identifying areas where reforms could deliver more competitive markets and drive productivity in a win for businesses of all sizes and for consumers”.

“The review will be an independent examination of how the competition framework is working, whether it is keeping up with emerging trends, and looking beyond the competition framework to identify impediments to competition with the goal of improving the living standards of all Australians,” Mr Billson said.

Government supports the development of Code of Conduct

Mr Billson said he supported the food and beverage industry’s continuing development of the Food and Grocery Industry Code of Conduct to aid in managing supermarket-supplier relationships. He said the Horticulture Code was a “worthwhile” comparison.

“The Horticulture Code came into force to address tensions in the industry concerning commercial transparency within Australia’s fruit and vegetable wholesale markets,” Mr Billson said. “The primary purpose of this Code was therefore to improve the clarity and transparency of transactions between growers and wholesalers of fresh fruit and vegetables,” he said.

Mr Billson said that since the Horticulture Code’s introduction in 2007, it appeared tensions around commercial transparency had reduced and that the industry was operating with fewer disputes or has been able to resolve them without the need for escalation.

Extension of unfair contract terms provisions in ACL to small businesses

Mr Billson said the Government’s policy for small business also included measures related to the protection that consumers currently get under the Australian Consumer Law (ACL) from terms in standard form contracts that are unfair. The Government is proposing to extend these protections to cover the small business sector.

“Small businesses often receive standard form contracts from business on a ‘take it or leave it’ basis, and encounter the same disadvantage as individual consumers when it comes to negotiating contracts,” Mr Billson said.

“For example, we understand that primary producers are increasingly contracting directly with the large supermarkets, and that in many instances, supermarkets insist on standard form contracts,” Mr Billson said. “We agree that many benefits flow from using standard form contracts – they save time and keep costs down. But they can also be used to shield a business from risk unfairly,” he said.

Mr Billson said that the recognised that extending the protection offered by ACL to small businesses in this manner would require a “thorough consultation process”.

FoodLegal Symposium on supermarket-supplier relationships in Sydney 12 November 2013

Food industry legal experts FoodLegal are to host an Afternoon Symposium on 12 November 2013 exploring the key questions and concerns in supermarket-supplier relationships and stakeholders’ solutions.

Speakers will include Coles General Manager of Corporate Affairs Mr Robert Hadler, Competition Lawyer Dr Alexandra Merrett, AFGC Director Dr Geoffrey Annison, FoodLegal Managing Principal Joe Lederman, Freshlogic Director Martin Kneebone, organic industry leader Dr Andrew Monk and trademark attorney Adam Hyland.  For registration details, click here.

Government reviewing competition laws for food retailers