Supermarket Inquiry: Who said what?

The Emerson interim report into the Food and Grocery Code of Conduct has called for the Code to be mandatory, not voluntary, and “should be strengthened to better protect suppliers, with new protections against retribution, since suppliers’ fear of retribution compromises the Code’s effectiveness.”

The report proposes the Australian Competition and Consumer Commission enforce it, with penalties of up to $10 million, or 10% of a supermarket’s annual turnover. To deter retribution, it advocates for an informal, confidential and low-cost processes for resolving disputes, providing options for independent mediation and arbitration

But the former Labor leader hosed down suggestions by the Nationals that the big stick of divestiture should be included.
 
Prime Minister Anthony Albanese was even more scathing, suggesting it was a ‘Soviet’ measure.
 
"Divestiture sounds OK until you think it through. OK, if you force someone to sell, who do they sell to? It is a reflection of the need to have serious responses to what is a serious problem rather than a populist response that sounds good," the PM said.

READ MORE: Why the courts should have the power to break up big business

Here's what the major players had to say 

NFF

The National Farmers’ Federation said the recommendations would help give the Code the teeth it needs.

NFF President David Jochinke said the report backed farmers’ call for the Code to be made mandatory and be bolstered with greater penalties for breaches.

“Clearly the Code has not been working as it was intended for many producers and a mandatory requirement provides more certainty and confidence to stakeholders across the supply chain.”

The NFF has also welcomed the recommendation to increase the penalties for non-compliance to up to $10 million, or even higher in some circumstances.
“Likewise, we support the proposal to better protect farmers from commercial retribution.

“It makes sense to monitor commercial decisions by retailer buying teams following a disagreement, and that will help give producers confidence to speak up," Mr Jochinke said.

NSW Farmers

NSW Farmers Vice President Rebecca Reardon said the report’s recommendations around the code could finally set the wheels in motion to address market power misuse by supermarket giants.  

“Having a mandatory Code of Conduct for our supermarkets and their suppliers with enforceable, meaningful penalties for its breach could make the world of difference when it comes to cracking down on the harmful practices of these superpowers.

“Anti-competitive activity needs to be stopped in its tracks, and it’s nice to hear the Federal Government step up and admit the current Code is not good enough.”


However, Emerson’s failure to back divestiture powers as one of the tools in the toolbox to address harmful behaviour by supermarkets was disappointing, Mrs Reardon said. 

 
The Nationals

Leader of The Nationals David Littleproud has criticised Labor for being out of touch and too slow to act.

Mr Littleproud said while recommendations including larger fines with enforcement and a mandatory Code were offered by The Nationals over a year ago, the broader suggestions won’t address all the issues consumers and farmers are facing.

Mr Littleproud said the final report led by Dr Craig Emerson due on June 30 is also still too far away and just another delay during a cost-of-living crisis.
 
The Liberal Party

Opposition leader Peter Dutton appears to be walking a fine line to ensure he appeases the National Party while not committing to the big stick of divestiture proposed by the Nats and the Greens.

“We have said that where there is market concentration and it’s resulting in higher prices being paid by consumers, particularly when they go to a Coles or Woolies outlet, that is something that we should consider in detail.”
 
Greens

Greens Senator Nick McKim says Coles and Woolworths will "face the music" at next week's Senate inquiry into supermarket pricing.
Senator McKim said Coles chief executive officer Leah Weckert and Woolworths boss Amanda Bardwell would be called in to front the probe.


"They'll have to answer for price gouging shoppers and putting the squeeze on farmers," he said in a statement on Tuesday.
"They'll have to explain how they are raking in billions in profits while millions of Australians are struggling to put food on the table."


The Greens' economic justice spokesperson said the bosses would have to explain why they had "fought any regulation that threatens their power over shoppers and farmers".


"We've heard from farmers and suppliers who have been sent to the wall because of Coles' and Woolworths' abuse of market power," Senator McKim said.
"It's time for the CEOs to front the Senate and face the music."

The Supermarkets

Coles and Woolies have clearly read the tea leaves on the public and political mood and have been quick to back a mandatory Code.

Hip pocket nerves drive political optics and the idea of supermarkets price gouging customers – a more motivating factor for retail politicians – is at odds with the incredibly thin margins the supermarkets actually deliver.

As the AFR’s Chanticleer column writes, margins are below 3% at the net profit level.
Any regulation created by the Code, or greater supplier power, may mean that price rises will follow. That is something that Anthony Albanese would want to avoid when trying to solve a cost of living crisis.

For their part the supermarkets trumpet the good they do, with motherhood statements on how shoppers have plenty of competitive options and the importance of maintaining healthy relationships with suppliers.

Ritchie’s IGA CEO Fred Harrison was more bullish on the Code but was more interested in the government’s merger and acquisition review, saying it would stop a Coles or Woolies dominating a geographic area, entrenching their market power.
“(The Code) is going to be good for suppliers in the end, because I think the suppliers will have more confidence to be able to deal with not only the smaller supermarket groups, but also the larger supermarket groups as well,” he told ABC radio.
“The chains will be all over it to make sure that they're not stepping out of line (because) no-one's going to want to get hit with a $10 million fine or 10% of sales.”

Worried about the competitive pressure Ritchie’s faces from the majors, Mr Harrison was hoping that the government’s new M&A laws might make a difference.

“Popping back to the mergers law and competition policy, I think what we need. Too often we see there's an excellent independent operator in a shopping center.... the lease has come to an end (and) Coles has purchases the center. (These) creeping acquisitions can cause issues.

“So we want more choice, more competition. And the best way to do that is not to have a particular region or area dominated by two players. We do need to get more independents, Aldi, Costco, other players, in to create competition.”