Coalition government would bring in divestiture power to deal with recalcitrant supermarkets

The Nationals have had a major win in having the opposition commit to divestiture legislation as a weapon of last resort against supermarkets guilty of uncompetitive behaviour.

Opposition leader Peter Dutton announced the policy at a joint press conference with Nationals leader David Littleproud, who enthusiastically backs the policy, and shadow treasurer, Angus Taylor who was anxious to stress the checks that would apply to it.

Earlier, at the Coalition parties meeting, there was strong debate about the radical move, which some Liberals oppose on the grounds it would represent excessive government intervention.

In his recent report to the government on supermarket competition, former Labor minister Craig Emerson recommended against divestiture.

He said forced divestiture could have the perverse effect of leading to greater market concentration rather than reducing concentration. He quoted the National Farmers’ Federation which said forced divestiture was not its policy.

Littleproud said the opposition supported the government’s plan to make mandatory the current voluntary Food and Grocery Code of Conduct, which covers relations with suppliers, but wanted to see powers go further.

The Nationals leader pointed out the Chair of the Australian Competition and Consumer Commission, Gina Cass-Gottlieb, had said divestiture powers would be “a good tool to have in the toolbox”.

Former Commission chairman Allan Fels wrote in The Conversation^[1] last month that Labor was the only political party not to support a divestiture power and said that might be because of pressure from the Shop, Distributive and Allied Employees Association.

While forcing supermarket chains to divest individual stores might not be practical, forcing them to divest arms such as petrol or liquor would be a potent threat, he argued.

Littleproud told the news conference the Coalition wanted a “range of penalties, scaling penalties, to change the culture, to make sure there is fairness and transparency from the farm gate to your plate”.

Taylor said it was a matter of getting the “balance right”.

There were “some important safeguards we’re building into this initiative that are crucial to ensure that the balance is right, and distinguish this from other proposals that have been running around,” he said.

The plan was based on section 46 of the Competition and Consumer Act, relating to the misuse of market power.

The opposition plan was confined to supermarkets and hardware retailers (notably Bunnings) and would only be applied where divestiture could lead to substantial improvement to competition, Taylor said.

A very real benefit would have to be proved that would help consumers, small businesses and farmers who supplied to the retailers.

A proposed divestiture would be required to pass a public interest test, showing there would not be job losses outweighing any of the benefits to consumers, farmers and small businesses.

It would need to go through a court. “It won’t be for politicians or regulators […] it’ll be for the courts to make those decisions,” Taylor said.

Greens spokesman Nick McKim said Labor was “now isolated as the only party allowing the big supermarket corporations to continue to misuse their market power and price-gouge Australian shoppers”.

The government will introduce its Future Made in Australia legislation on Wednesday.

In a statement Prime Minister Anthony Albanese and Treasurer Jim Chalmers say the legislation is “all about unlocking private sector investment to build a stronger, more diversified and more resilient economy powered by renewable energy that creates secure, well-paid jobs around the country”.

They say the legislation will embed a disciplined approach for government investments under the scheme to ensure they made the most of Australia’s net zero potential.

“This package does three main things. It will legislate our new National Interest Framework, introduce a robust sector assessment process, and outline the Community Benefit Principles that will apply to investment decisions,"the statement says.

The national interest framework defines criteria for identifying where the government should invest.

They should be fields in which Australia could have a comparative advantage or where economic security or resilience make it imperative to invest in domestic capability.

Treasury will be able to undertake analysis of the extent to which areas of the economy align with the framework, barriers to private investment in these areas and opportunities to address them.

The legislation also sets out Community Benefit Principles to be applied. Decision makers must have regard to how potential investments

• promote safe, secure and well paid jobs

• develop more skilled and inclusive workforces

• engage collaboratively with and achieve positive outcomes for local communities

• strengthen domestic industrial capabilities

• demonstrate transparency and compliance in relation to the management of tax affairs, including benefits received under the scheme.

There will be a Future Made in Australia Innovation Fund to support emerging technologies in industries like green metals, clean energy manufacturing and low carbon liquid fuels.

References

1. ^{^} The Conversation (theconversation.com)