The effectiveness of
Competition and Consumer Act 2010
establishing the Select Committee on Australia's Food Processing Sector, the
Senate identified 'the impact of Australia's competition regime and the food
retail sector, on the food processing sector, including the effectiveness of
the Competition and Consumer Act 2010' as one of the inquiry's terms of
Throughout its inquiry, the committee sought to investigate whether the current
market is characterised by competition that will have positive outcomes for
consumers or if the market is such that the long term viability of Australia's
food processing sector is at risk.
Competition and Consumer Act 2010
and Consumer Act 2010
(the CCA) contains Australia's core legislation for addressing anti-competitive
conduct. The object of the CCA is to enhance the welfare of Australians through
the promotion of competition and fair trading and provision for consumer
protection. The Act does this through a legislative framework that makes
certain conduct and practices unlawful, while ensuring that an environment that
facilitates competition remains. In its submission to the inquiry, Treasury
explained how the CCA achieves this:
laws are intended to protect the competitive process in our markets, which will
generally deliver greater efficiency and productivity, and better outcomes for
consumers...In some cases, however, conduct may be authorised where it may
nonetheless produce a net public benefit.
important to note that a feature of Australia's competition framework is that
the laws are 'principally concerned with protecting the competitive process,
not individual competitors. They are not designed to protect competitors from
rigorous competitive behaviour, not to force businesses to compete'.
competition rules of the Act cover a range of conduct including cartel conduct,
misuse of market power, anti-competitive agreements and exclusive dealing, as
well as prohibiting mergers and acquisitions of companies that would result in
a substantial lessening of competition. The consumer protection provisions
include rules regarding 'country of origin labels', which set parameters for
claiming that a product was produced, for example, in Australia, as well as
other provisions. The consumer protection provisions of the CCA are explored in
Chapter 5 of the report.
into the CCA
about the effectiveness of the CCA have been the subject of much inquiry in
recent times. In January 2008, the Australian Competition and Consumer
Commission (ACCC), which is responsible for enforcing the CCA, was referred an
inquiry into the competitiveness of retail prices for standard groceries
in response to community concerns about the rising cost of food. The ACCC's
report was presented to the Minister for Competition Policy and Consumer
Affairs on 31 July 2008.
report, the ACCC concluded that the changes in retail price reflect changes in
the farm-gate/wholesale price
and advised the government that '[e]vidence...does not support the proposition
that retail prices have risen while farm gate prices have stagnated or
Rather, it concluded that 'a range of domestic and international factors have
substantially contributed to the recent increases in food prices in Australia'
- the current
drought, which has reduced the supply of many agricultural products and
increased the costs of farming;
disasters such as cyclones and floods, which in combination with quarantine
restrictions have caused considerable supply disruptions for some fruit and
vegetable products; and
international commodities boom, which has: increased the cost of commodities
(such as fertiliser and petrol) used to produce and transport many Australian
food products; [and] increased the prices some Australian farmers and food
producers can sell their products for in export markets, leading to higher
The ACCC went
on to explain that although:
difficult to be certain about the extent to which the above domestic and
international factors account for the observed increases in food prices...any
potential contribution resulting from increased margins of major grocery
retailers and wholesalers is small relative to the overall increase in food
2008 grocery prices report did, however, result in the introduction of unit
pricing, as well as changes to the Horticulture Code of Conduct and planning
laws to prevent restrictive covenants in leases and enable market access for
ACCC's 2008 report, the operation of the provisions within the CCA in the
context of the grocery sector was again the focus of inquiry through the Senate
Economics References Committee's inquiry into The impacts of supermarket
price decisions on the dairy industry.
That inquiry, which concluded in November 2011, arose following a decision of
the major grocery retailers to reduce the retail price of their own brand
(private label) milk to $1 a litre. Although the Senate
Economics References Committee's inquiry concentrated on only one sector of the
food industry—the dairy industry—the committee recommended that the government
initiate an independent review of the competition provisions of the CCA.
establishment of the Senate Select Committee on Australia's Food Processing
Sector follows on from these earlier inquiries and was tasked with
investigating the numerous pressures that are confronting the industry. The
committee considers that determining the effectiveness of the operation of the
CCA from the perspective of the food processing sector requires consideration
of the entire food supply chain—from the cost of primary inputs to the
competitiveness of the retail sector as the point of supply to Australian
In its Issues
paper to inform development of a national food plan, the government
identified competition in the food sector as being 'essential to ensuring
efficient use of resources and encouraging rapid uptake of new technologies in
food production and services'. In that paper, the
government also identified that the current level of competition in the grocery
sector is a matter causing concern to some stakeholders:
strong price competition between major supermarkets, which is placing downward
pressure on grocery prices, is raising some stakeholder concerns about the impact
on prices received by food processors.
government explains that a competitive food sector benefits consumers through
'improvements in food quality, greater consumer choice, competitive grocery
pricing, and sufficient growth in food supplies to meet expanding demand',
this committee has received evidence that suggests the current characteristics
of the marketplace are threatening the ongoing viability of Australia's food
processors. This chapter explores the evidence that the committee received.
The current market
Treasury, the current market in the Australian food processing industry is
generally consistent with international markets which also tend 'to be
concentrated, with two or three key players in each product type and a number
of smaller competitors'.
processing sector is dominated by two major retailers, Coles and Woolworths.
Estimates of their combined share of the food retail market have been
consistently high. In 2005, it was estimated that Coles and Woolworths had a
combined market share of 76 per cent. In 2008, the ACCC
estimated the combined share to be 70 per cent of the national supermarket
packaged grocery market and approximately 50 per cent of fresh product sales.
Again, in 2010, IBISWorld also estimated the combined market share to be 70 per
The lack of
competition between the two large supermarkets was consistently identified as a
concern by submitters and witnesses who appeared before the committee.
Olive Association told the committee:
Woolworths control 82% of a farmer's/producer's access to a consumer. The
combined market share of this duopoly is the highest in the world. The
situation is making it nearly impossible for any producer to make a profit from
dealing with supermarkets in Australia.
the Winemakers' Federation of Australia (WFA) expressed concern that the retail
market has become highly concentrated. It cited the market power of Coles and
Woolworths (who are now the two major liquor retailers) as a major concern for
their industry. The WFA explained that the 2011 Woolworths acquisition of
Cellarmasters, an online wine retailer, has given it 'full vertical ownership
through the wine supply and value chain' as it included the ownership of
Dorrien Estate, Australia's largest small-batch winery, and Vinpac, with
bottling, packaging, storage, filtration and testing services.
Australian Food and Grocery Council (AFGC) is also concerned by the current
level of supermarket concentration in Australia:
gone from a scenario where, in 1975, Coles and Woolworths had 38 per cent of
the market to one where, last year, they had nearly 80 per cent.
criticisms of the current level of concentration in the supermarket retail
sector were raised with the Treasury, the department acknowledged that the
focus of the CCA is the consumer rather than the competitors within a market:
law plays an important part in prohibit[ing] anti-competitive conduct. Competition
laws are principally concerned with protecting the competitive process in the
interests of consumers not individual competitors or firms in the industries.
about how it ensures policy settings achieve the right balance between consumers
and competition, Treasury responded:
way that Australia and most other comparable nations have addressed that issue
is that we have passed a set of competition laws that proscribe certain forms
of behaviour and then we have some factors that the competition regulator takes
into account if there is an allegation that there are anticompetitive practices
explained, however, that it 'does not have a role in judging whether markets
are competitive or not' but that that role rests with the independent
and acquisitions and current levels of market concentration
There is no
doubt that concentration in the Australian grocery retail sector is at
unprecedented levels. The committee heard evidence that suggests this has
occurred over time as a result of 'creeping acquisitions'. Creeping
acquisitions are a series of small-scale acquisitions that, individually, do
not 'substantially lessen competition' in a market, but collectively may do so
Supermarkets have bought up 'small brands which on their own do not appear to
be much' but which over time have built up to be 'quite substantial ownership
of market power'.
Each of these small acquisitions is not in breach of section 50, and the series
of acquisitions are therefore permissible by law.
2011, federal parliament passed a law amending the section 50 test to refer to
'a substantial lessening of competition in any market' (as opposed to 'a
market'). The bill also amended section 50(6) of the CCA, omitting the word
'substantial' in definition a 'market' for purposes of section 50. The intended
effect of both amendments was to clarify that the ACCC and the courts can
examine local markets which may be small geographically but where creeping acquisitions
Australian Manufacturing Workers' Union (AMWU) questioned the effectiveness of
the current legislative provisions given that, in their view, creeping
acquisitions that are not illegal have led to the market dominance of the two
said consistently that the anticompetitive parts of the legislation need to be
toughened up and expanded to include the types of behaviour that are taking
place. There also needs to be a greater oversight of the industry. As you say,
according to the [current] legislation and the [publicly known] facts, there
has been nothing illegal about the creeping acquisitions that have led to a
duopoly having 80 per cent control of the retail food and grocery market.
However, the anticompetitive practices that have now arisen from that are
systematically destroying the industry.
recognition that the CCA through section 50 prohibits mergers and acquisitions
that would 'have the effect, or be likely to have the effect, of substantially lessening
competition in any market'
the committee, through its inquiry, sought to investigate the administration of
these provisions given the evidence it had received concerning the apparent
market power of the major retailers.
submission to the committee, Treasury explained the role of section 50 of the
CCA, identifying that there will be times when merger activity can be of
benefit to consumers:
of a merger provision is to distinguish between welfare enhancing and welfare
reducing mergers and acquisitions ... Mergers between firms can be an effective
way of developing competitive advantage, optimising the benefits of
complementary strengths and taking advantage of economies of scale and scope.
Mergers can also operate as an important discipline upon poorly performing
management. Merger activity can thus improve efficiency to the benefit of
consumers and the community generally.
given the level of concentration in the grocery retail sector the committee
questioned Treasury about its role and that of the ACCC in monitoring merger
activity to ensure concentration levels as a result of creeping acquisitions do
not get to such a level as to cause concern to government:
provide advice [and analysis] from a whole of economy perspective and from a
whole of Australia perspective on a wide range of factors, You talked about a
particular measure of concentration. In fact I do not think it was with respect
to market concentration. It was the number of outlets. We would also supplement
our advice about how a particular indicator might not provide the full picture.
For example, even measures of concentration are not necessarily reflective of a
firms', or one or two large chains', market power.
that again. You are saying that the fact that Coles and Woolworths have 80 per
cent of the dry grocery market is not itself a significant determinative
Paine: What I
said was that, by themselves, a measure of concentration... by itself is not
necessarily a measure of firms' market power. Even if it were, from a
competition perspective the issue is about what a firm or firms do with that
market power. But let us just go back to the previous point, which is [what]
firms' market power reflects is not determined by concentration, because, for
example, there are other factors, including how difficult it is for competitors
to enter the market.
added that international supermarket chains such as ALDI and Costco are
emerging as a new source of competition. It also explained that
concentration alone does not mean a market is anti-competitive or that the
current competition laws that apply are ineffective:
market concentration, however, does not necessarily indicate that incumbent
firms have market power. When assessing the level of competition in a market,
it is also important to assess other factors, such as the presence of barriers
to entry or expansion, competition from imports, the level of countervailing
power held by buyers, the nature of key competitors, and the availability of
substitute products or services.
The committee notes, however, that not all submitters viewed the
entrance of ALDI and Costco into the Australian market as a positive one. Dick
Smith wrote in his submission that:
At the time ALDI commenced in Australia I was openly critical
of the lack of discussion of the downside having made myself familiar with its
vast operations overseas. I predicted that ALDI would take substantial profits
out of Australia and make a fortune for their German owner, already one of the
wealthiest billionaires in the world however the business model used by ALDI
would completely change the food processing, manufacturing and retailing
industry in Australia. I have continued over the past ten years to express my
is concerned by the concentration of the grocery retail sector and finds
Treasury's assessment of the situation, that 'high market concentration does
not necessarily indicate that incumbent firms have market power', less than
In recent years much of the increase in concentration has come about
through creeping acquisitions. Although the committee acknowledges the
government's recent minor amendments to certain elements of section 50 of the
CCA, it takes the view that those changes were placebo provisions and will not
achieve much. The review of the CCA should consider whether section 50 ensures
that the cumulative effect of acquisitions over time is taken into account by
of market diversity
concentration increases, it results in a reduction in the diversity of markets
into which participants in the food industry sector can sell their products.
The committee heard evidence from Professor David Hughes, Emeritus Professor of
Food Marketing at the Imperial College of London, that this result occurs in
all markets that are highly concentrated. Professor Hughes explained, however,
that in such conditions the ability to find new buyers for products can be
'devastating' for businesses if they lose a customer:
have a couple of players with that proportion of the market then, clearly, they
are going to have an enormous influence on the market. ...If you are dealing
with—as in our particular case Tesco's, Sainsbury's and Marks and Spencer—just
three customers, they would be well over half our total turnover. If you upset,
or if you are dropped or if market conditions change and you lose one of those
customers, then it can be damaging Within your context where you only have two
principal retailers, it can be devastating for the business. If you are
suddenly dropped by Coles and then dropped by Woolworths, it makes for a very
difficult business environment.
Hughes explained that suppliers need to look for diversity in markets to ensure
they have choice in situations where the market is concentrated with only a
small number of competitors:
competition in the market the better it is for suppliers. That just seems to me
to make common sense. In South Africa at the Global Table Grape Congress I was
talking to major exporters from South Africa and Chile and ... they said what was
encouraging from their perspective was growth in emerging markets because the
emerging markets in [places like] , India or China were just starting to get to
income levels where they saw markets for grapes within their own countries.
Now, when they are pushed by the Tescos and the Walmarts of this
world—remember, they are trained to get the best deal—they could say, 'We'd
love to sell you more at low prices but actually we've got more customers and
they are willing to pay a little more.' ...For us, we have the latitude in that
there are five or six principal buyers. We do not have just one model. There is
the Tesco model, [for example] [There is] the Walmart model towards dealing
directly with growers.... That is a little threatening to suppliers who are
Hughes explained that for countries like Australia, the opportunities that are
presented by export markets could perhaps provide some protection to suppliers
if they did not want to deal with either of the two major supermarkets:
Australian context, it is more challenging for large-scale suppliers who do not
have the export market and who could lose that volume if they dropped a major
customer like Coles or Woolworths.
you want me to just pitch in on the food manufacturing end, it is really
encouraging, isn't it, when Australian processors and manufacturers have that
export option? I would say, subjective though it may be, but I have been
working with food manufacturers and processors in Australia for the last 15
years or so, that I am often surprised at the proportion of Australian
processors and manufacturers who are inward looking and do not have an export
view of the world.
supports the view of Professor Hughes and recognises that having a diversity of
markets available is of significant benefit to processors and suppliers. The
committee recognises, however, that due to market concentration in Australia
and the current high Australian dollar, there are limited options in the market
for processors and suppliers at this time.
provided to the inquiry also supported this view. For example, the meat
industry representatives took a very different attitude to supermarkets than
other witnesses because they had export market alternatives if domestic retail
prices and conditions became unsuitable.
Sensitivity to price
that the ability of food processors to find alternative domestic destinations
for their products was declining, given the increasingly concentrated retail
sector, the committee also heard that the sector is also becoming increasingly
pointed out that the Australian grocery market is a price based market, so if
Coles and Woolworths cannot get a product for the price they want in Australia
they will source it from overseas. The AFGC added that this is occurring for
products such as canned pineapple, tuna and frozen fruit and vegetables, which
are significantly cheaper when sourced offshore.
explored what changes have led to this situation. Dr Geoffrey Annison, Deputy
Chief Executive of AFGC, offered his view:
the fundamental reason is because the asymmetry in the power between the
retailers and the branded manufacturers has grown. Whereas 15 years ago
they [branded manufacturers] were powerful, they are not nearly as powerful as
they are now. So there was more power with the branded manufacturers to resist
and say, 'We are not going to give you that product.'
explained to the committee that change is the result of the level of
concentration and subsequent reduction in retailers, as well as the shift of
those retailers into private label products:
of the other retailers have gone by the board. I think also there has been some
shifting of the position within the branded manufacturers so they have not
maintained that differentiation between their private label manufacturing and
the branded products that they were offering. That is reflected, I think,
mainly because of the power that the supermarkets now have in terms of the
ability to de-list products and take products off the shelf.
The rise of the private label
Over the past
ten years, there has been a significant increase in the private label range of
products carried by the supermarkets. The AFGC informed the committee that the
market share of private labels grew from 15 per cent in 2003 to 25 per
cent in 2010 and that both Coles and Woolworths are looking at doubling their
private label market share.
explained the rising growth in private label products to new entrants such as
ALDI and Costco:
retail end of the food supply chain, the range of products available in supermarkets
has evolved significantly in recent years, partly due to the introduction and
growth of private label products. New entrants such as ALDI and Costco, both
with private label brands, are in part also motivating the major supermarket
chains to turn to private label brands as a competitive response.
Treasury informed the committee that although private label goods are growing
and expanding into 'less traditional categories such as shelf stable fruit', in
comparison to international markets, private label goods in Australia hold
substantially less market share.
Treasury also explained that the rise in private labels is good for consumers.
notes that at the retail end of the supply chain the range of products
available in supermarkets has evolved significantly in recent years partly due
to the introduction of and growth in private-label products. We also note the
concerns of food processors, however, on the other hand, private-label products
do also provide consumers with alternative, more affordable options and
increased competition and choice, while potentially placing pressure on parts
of the operations of food processors is of direct benefit to consumers and to
the economy more generally, for example, by effectively raising household
Carnell, Chief Executive of the AFGC, explained the attractiveness of private
label products to the large retailers:
line needs to turn over about 50 per cent more stock to be more lucrative than
a private label product. The reason for that is quite clear. Private label
products do not have to build a brand, they do not have to do R&D, they do
not have to buy shelf space and they do not have to do advertising. All of that
is already done by the brand manufacturer, who has actually created the market
share for the particular product.
elaborated on the difficulties faced by branded products in competing with
these private label products:
you see is a scenario where Coles and Woolworths own 80 per cent of the
supermarket shelf space in this country. You can look at it almost like real
estate. ...You need to be able to get onto that shelf to grow your product and to
have the economies of scale that you need to be able to compete with those
cheap imports. The dilemma is that, of that 80 per cent, more of that 'real
estate' is being taken up by private label products, which means that the real
estate that is left for Australian branded products is decreasing quite
significantly. That means that access to customer is becoming significantly
harder. Also, the other issue is that, unless you deal with Coles and
Woolworths—that 80 per cent of the shelf space—your capacity to get your
product in front of enough consumers to achieve the economies of scale you need
to achieve to compete in this market goes down significantly.
Arnott's also raised concerns about the growing trend towards private label
brands on supermarket shelves:
of retail, there is a growth strategy around private label. They certainly want
to make private label―and I think they have both gone on record as saying
this―a greater proportion of the food spend. The challenge we have is to
ensure that, when consumers have that choice at the market shelf, they buy an
Arnott’s or a Campbell's product and not a private label product. We will
ensure that we have products there that will stay ahead of the private label
game and tempt those consumers.
As the market
share of private label products increases, and the shelf space available to
branded goods decreases, there are concerns among the industry that consumer
choice will decrease and that this result is already evident:
it might have been private label plus four or five other brands, with the
limiting of the number of brands that are actually being given access to shelf
space, particularly because of private label growth, ...the power is greater now
within the retailers of denying that access.
echoed these concerns stating that the result of increasing private label products,
particularly in goods such as wine, will be a reduction in consumer choice:
retailers have brought in their own brands and their brands look very similar
to existing brands—and in some cases very similar. So from the consumer's
perspective there is no discernible difference between what was a brand is now
an own brand. As the product gets homogenised, we are seeing the gravity moving
towards the owners of the own brands because for existing brand owners to come
into the marketplace they have to see their product sit on the shelf at a place
that is not where the foot traffic goes and they have to do it at a price that
is dictated to them by the retailers. That is the problem that we are seeing at
that bottom end. We are now seeing it starting to creep into the premium part
of the business. It is our view that if we get to a point where the retailers
have such dominance in terms of the production and supply of the product that
will give them a great deal more latitude to increase price in the long term
and it will compromise a lot of the systems and the integrity that we put into
the production of our wine. [This] will affect the product that [consumers]
will be getting and their ability to have choice as to that product.
Rochfort, General Manager of Sustainable Development at Greater Shepparton City
Council, suggested that with the shift to private labels, domestic
manufacturers need assistance to develop brand equity and brand loyalty:
focus of many of our manufacturers is on the domestic market where they are
competing on private label brands. [and] strong brand equity in some of their
private label lines [is now growing quite significantly]. ...What our
manufacturers are telling us is that there needs to be some initiative and leadership
in helping them develop a sense of brand equity and brand loyalty around
Australian manufactured produce because they do not have a level playing field.
They are competing with cheap imported products and they are finding it very
In its submission
to the inquiry, Treasury recognised that 'concerns have been raised about the
impact of private label products on competition in the retail grocery market
and on the viability of branded products'.
Treasury also noted that the ACCC, in its 2008 Grocery Report, reported that:
introduction and growth of private label products has the potential to enhance
the buying power of major retail chains and decrease the competitiveness within
vertical supply chains.
on to explain that although 'private label products may increase competition by
motivating suppliers of branded products to be more competitive', there may be
other detrimental impacts:
generally increased use of private label brands is likely to put downward
pressure on prices, which benefits consumers, there may also be other effects
such as a crowding out of shelf space which impacts on producers of branded
products. As the ACCC Grocery Report highlighted, concerns have been raised
that the growth of private label products is lessening consumer choice by
narrowing the range of branded products available.
explained, however, that ultimately the market will decide as consumers make
acknowledged by Treasury, the ability of retailers to sell private label
products may crowd out branded items. Food South Australia Inc. expressed
concern about the ability of the supermarkets, through their private labels, to
act in both the capacity of a supplier and retailer, arguing that private
labels 'just permeate the shelf and the consumers do not have the choice they
used to have':
do want choice, and the permeation of home brand damages the opportunity for
food manufacturers to build brands and brand loyalty. There is something
inherently wrong with a customer being a competitor. Retailers can capitalise
on the leading brands' innovation without the risk and expense of developing
the intellectual property.
explained to the committee how private label products dampen competition:
the supermarkets have taken a decision to reduce the number of products on the
shelves ... and gone out to the food manufacturers and said, 'We’re
going to have our label and one other. You may be the one other. If you do
exactly what we want you to do, you will be the preferred supplier for as long
as we feel free to have you there.' Those negotiations generally require the
person who is going to be the ‘one other’ to produce the private label product.
Manufacturers are saying to us that they are damned if they do and damned if
they do not. If they refuse a Coles or Woolworths private label, which is in
direct competition with their own product, they find theirs taken off the
shelves and there are all sorts of accidents and blockages to selling their
The AMWU also
expressed concerns about the ability of the major supermarkets to act as both a
customer and competitor, arguing that they are increasingly sourcing the
private label products from lower-cost overseas processors.
raised these matters with both Coles and Woolworths.
discussing their private label products, Coles were categorical in refuting
that they have specific strategies to increase their private brands at the
expense of branded goods. Coles explained to the committee:
stage have we adopted a target around the proportion of private label sales.
Indeed, branded products continue to represent 75 per cent of overall sales in
our supermarkets. Our strong view is that customers will ultimately decide what
level of private label products they will buy, based on the quality and the
value of the product offering. There is another document that shows how we make
our decisions on shelf ranging. These are pictorial documents and they show
that actually we make decisions on products on shelves based on sophisticated
customer preference modelling and volume of sales. There is no strategy to
replace branded products with private label.
view private label products as providing consumers with choice:
our own brand lines our aim is to increase choice and value for our customers.
[This] was recognised by the Australian Competition and Consumer Commission,
who found in their 2008 Grocery inquiry that the introduction of private label
products offers consumers additional choice and in precompetitive. ...Our
customer research tells us loud and clear consumers love the value and quality
offered by own brands.
research shows that the trend towards private label products is occurring
internationally as shoppers seek out savings in their household budgets. In the
United States for example, research has shown that the number of people feeling
'self-conscious' or 'embarrassed' when purchasing private brand products is
declining as private label goods are increasingly viewed as the 'normal' choice
when shopping 'rather than a solely budget-conscious option':
surveyed shoppers, 51% reported feeling savvy when purchasing private brand
products. Only 11% claimed to feel self-conscious, and 3% embarrassed, at being
seen buying private brand products.
submitters view the growth in private label as a threat to their ongoing
viability, this view is not shared by the retailers who informed the committee
of their preference to source their private label products locally in
recognition that customers 'place a purchasing preference on Australian grown
and made products.'
explained their 'Australian first' sourcing policy and detailed the recent
expansion opportunities it had given producers through long-term supply
example in recent times was a decision to award Bega Cheese a five-year
contract to produce Coles brand cheese, which was formerly sourced from New
Zealand. The Bega Cheese contract means Australian dairy farmers will be
supplying an additional 70 million litres of milk for Coles every year. Other
recent Coles brand announcements that will help Australian farmers and food
producers include an extension of our 100 per cent Australian grown frozen veg
range, the majority of which is grown in Tasmania and processed by Simplot in
Devonport ...The range is worth nearly $40 million a year to Tasmanian vegetable
growers and supports hundreds of jobs ....
weekend we also announced an exclusive five-year agreement with a leading
Tasmanian business, Tamar Valley Dairy, to produce Coles brand yoghurt for our
supermarkets nationally.... The expansion of yoghurt production will increase
demand for Tasmanian milk, which will help to underpin the growth of this key
similarly explained their 'strong bias of support for Australian supply of our
own brand ranges':
invests heavily in cooperating with suppliers on new product development... This
has seen considerable investment by us in small- and medium-sized manufacturing
all around Australia. Good evidence of this sort of approach is our Macro range
[which] ... is now made up of some 350 products, almost 90 per cent of which are
sourced from Australian suppliers.
explained that buying locally is preferred but identified availability has
forced Woolworths to source some products for their private label brands,
particularly frozen vegetables, internationally:
absolutely look to buy first in the local market, if we possibly can. Apart
from anything else, it is much easier to do business that way than to
necessarily contract for supply and ship it from overseas. The other issue is
in terms of availability of local produce at any price. We note the sourcing
arrangements for frozen vegetables. We would like to be able to obtain the same
level of supply and we cannot. At the moment Woolworths, in terms of frozen
vegetables, have a very limited amount of Australian product. The business is
split almost equally between New Zealand and other countries around the world.
hopeful, however, that this will change and that their goal is to source 30 per
cent of frozen vegetables locally:
to increase that proportion substantially over the next 18 months. The
projection at this stage is to have some 30 per cent of frozen vegetables
sourced locally, about 60 per cent from New Zealand and only 10 per cent from
other parts of the world. But that is dependent on being able to obtain supply.
The committee considers that while the growth in private label products
represents a threat to Australian food processors, it also has the potential to
provide opportunity for processors.
The sale of
private label goods plays a role in consumers being provided with choice, and
as trends indicate that growth in private label consumption is likely to
continue, food processors should seek to take advantage of the declarations of
both Woolworths and Coles to preference sourcing the food products for their
private label goods locally.
does note with concern the suggestion that growth in private labels will occur
at the expense of investment in research and development and product
innovation. The committee takes the view that retailers must recognise the
value and importance of such investment and continue to encourage local
suppliers who are investing in research and development led innovation. The
committee is concerned by the suggestion that the large retailers are able to
take advantage of other companies' product research and development. It would
be uneasy if the growth of private label products occurred at the expense of a
vibrant forward-looking local food processing sector.
growth in supermarket private label products is a phenomenon that is not unique
to Australia and does present opportunities to the sector, the committee
suggests that the CCA is not effectively addressing the negative consequences
of the growth or considering the long-term interests of consumers. The
committee acknowledges the need for the CCA to protect and promote the
interests of consumers and ensure food remains affordable. However, it is
concerned that soon the 'pendulum' might swing so far in favour of the
short-term interests of consumers that research and development, innovation and
diversity will be lost in the market place and consumers begin to lack choice
and may face increased prices.
expresses concern that through private label investment, the major supermarkets
are increasing their ownership across the supply chain, reducing the number and
diversity of food suppliers and processors in Australia. It notes the following
comment of the AMWU:
The common argument that the current domestic market
situation is all about competition and if you are unable to successfully
compete in the competitive domestic market it must be because your company is
not as efficient or competitive is disingenuous.
Coles and Woolworths are not generally thought of in terms of
being food processors, but through their use of their private brands they are
in effect, if not in name, major processors.
They do not own a single factory or employ a single person;
they produce their private labels through the use of contractors. Essentially
they are no different from any other manufacturer. Other manufacturers might
use third party contractors to supply them with products from time to time, but
in so doing it does not mean that they are any less of a manufacturer or
The nature of
Australia's retail sector was examined by the ACCC in its 2008 grocery prices
report. In its submission to the
inquiry, Treasury drew the committee's attention to the ACCC's analysis of the
food supply chain in Australia and the Commission's observation that the chain,
from production to retail, differs for different categories of food:
...food and grocery processors engage with supermarket chains
to achieve broad distribution of their products through supermarkets by
increasing their product range or establishing direct supply contracts with
market entrants such as ALDI... competition between brands for limited shelf
space helps to constrain prices at which suppliers can sell their products.
nature of the food supply chain in Australia, the relationships between market
participants are therefore very important. In its submission, Treasury
identified a number of factors that 'impact on the relationships between food
manufacturers and retailers':
shelf space allocations are an important point of negotiation
between retailers and manufacturers and wholesalers;
in some instances, food retailers are also seeking to import
branded products through lower cost international supply channels (so-called
increased market penetration of retailers' 'private label'
the entrance of new players in the retail grocery sector
(particularly multinational retailers such as ALDI and Costco).
Terms of Trade
has received evidence that suggests the relationships between participants in
the food supply chain are characterised by an imbalance in bargaining power.
The WFA explained how control over 70 per cent of the market gives Coles and
Woolworths 'quite a degree of influence over the practices and activities of
our members in terms of their sales through those channels' and that Coles and
Woolworths are able to use that power 'in such a way that it takes any of the
negotiation out of the hands of our members'.
processors spoke of the way trading terms were being used by the major
retailers in their contract negotiations with food processors.
Strachan, Chief Executive of the WFA, gave anecdotal evidence of what can
happen to his members in their negotiations with Coles and Woolworths:
that our members will talk about to me but not publicly is that, in
negotiations with the retailers, it is pretty much a spreadsheet based approach
towards pricing that demonstrates that they have been able to benchmark
lowest-cost production across a whole range of producers. They have, obviously,
access to all of that information. In doing so, where any producer does not
meet best practice then the attitude and the position of those retailers is,
'Well, that comes off your margin; it's not our problem.' So, in a market
forces sense, it makes a degree of sense, but in a practical sense it has major
implications because there are practical reasons why some can benchmark at
lower levels than others, such as proximity or any other number of factors. They
are using that very much to their advantage in terms of driving down cost...
of course we have the situation, being in an oversupplied market, where there
are any number of producers lining up to sell to them because they have
distressed product that they need to sell into the marketplace. We know that
the oversupply will not last forever, but our big fear is that, once they
entrench their own brands in the marketplace—at the same time devaluing the
existing brands or those brands that have been in the marketplace and turning
it into a homogenous price based product—then they will have a foothold in that
we will not be able to back away from that.
Coles and Woolworths advised the committee that where suppliers express
discontent in negotiations the relationship between the retailer and the
supplier is not affected, submitters suggest in fact that such occurrences
result in delisting of products without consultation and at a cost to the
supplier. Such experiences are said to
have led to the current situation where processors are reluctant to speak
publicly due to a fear of retribution.
about pressure to accept trading terms including additional fees, were raised
with the retailers, Woolworths explained that negotiations although tough, were
say that we are tough negotiators... We negotiate fairly in the marketplace on
behalf of our customers. If we agree to an increase or a change in trading
terms with a supplier, it will be because they see a benefit in doing so.
went on to explain that 'rise and fall' clauses are not unilaterally altered if
the retailer matches a competitor's promotion:
not see that circumstance as part of trading terms—that is, day-to-day product
and price negotiation. We would undertake that negotiation with the vendor not
in arrears but ahead of any development in the marketplace. We would not
unilaterally take money in any way, shape or form. But we would not see that as
something we would describe as trading terms; we would see that as normal
day-to-day price negotiation. Trading terms is a framework that we set out
under which the two parties agree to do business. ...There is a long-term
agreement to do business between two parties and then that business is done on
a daily transactional basis.
those [rise and fall clauses] and they typically apply to circumstances such as
fresh milk supply and things that go over a period of time when there may be
changes to market conditions. On packaged goods and normal package buying, it
really is a matter of a price that is accepted for a period of time until such
time as another price is negotiated with the supplier.
Mr Dunn told
the committee that in those cases where a competitor announces a price
promotion and Woolworths matches the price in the market, they will ask a
supplier if they can contribute to the discount but they do not alter trading
would generally involve a telephone call and a discussion with the supplier to
say: 'I am now selling at a lower margin in the marketplace on this particular
product. Are you in a position to help me? I can do this, this and this if you
are able to do that, that and that.' If it happens, that is fine; if it does
not happen, we match the price anyway and we trade as we are.
to the committee's concerns about trading terms, Coles explained that its
trading terms are complex and involve a variety of terms, 'probably well over
100'. When asked about their top five trading terms, Mr Durkan said:
many instances as you could have we would prefer to have net cost prices, so no
trading terms at all apply to our cost prices. If I take most of our fresh
areas, they are net prices. Where we get into complex terms tends to be in our
groceries and more on our branded side than on our private label side. Those
terms are so varied and there would be no commonality around them, and in many
cases designed by the food manufacturers rather than—
said that the shape of their trading terms are decided by the food
manufacturers and explained that:
trading terms are built over many, many, many years. These are not trading
terms that have just evolved in the last two, three, four, five years. If we
could, Coles would have net trading terms. We would have a net price and we
would be done with it. There are variable elements, depending on how much
marketing spend the manufacturers wish to make in a year.
When asked to
explain their trading terms 'in one sentence', Coles stated:
a range of terms; when a supplier wants to promote products, they have terms
explained that suppliers of fresh food such as bananas would not be charged a
marketing expense, ullage expense, or freight expense as fresh food items are
'net trading terms', whereas trading terms on branded products may require a
supplier to invest a promotional percentage with Coles.
Coles' and Woolworths' assurances that their negotiation processes are fair,
the committee heard repeatedly throughout its inquiry that food manufacturers
were reluctant to speak publicly about specific instances of abuse of market
power by the major supermarkets. The committee encountered a genuine reluctance
for witnesses to come forward and give evidence on these matters, even on a
confidential basis. For example, Food South Australia Inc. referred to a 'fear
of retribution' and characterised the situation of 'very lopsided contract
processes' as being 'somewhat David and Goliath'.
from Food South Australia cited the experience of a food supplier going into
decline as a result of dealings with a major supermarket:
supplier three years ago supplied 14 products across Australia to one of the
major supermarkets, to anywhere between 450 and 700 stores. Today they have no
national distribution. This is largely because of new agreements proposed
around waste and mark-down that were in addition to the trading terms that
existed. They have now been replaced by imported product.
other examples of suppliers' negotiations with the grocery retailers,
illustrating the difficulties arising from contract arrangements on prices:
two is where the input costs of a business have increased to 40 per cent higher
than they were three years ago. After 12 months of negotiation a price increase
was granted. This has impacted its ability to manage price rises with other
retailers and margin that it has never been able to recoup. The trend has been
to apply additional trading terms which in turn provide more margin to the
retailer but not to the supplier.
three is, again, of increased input costs year on year and an inability to
increase prices. Other retail businesses want the same prices as the majors,
and the result has been losing margin to retain and grow the business while
absorbing increased costs. [Because] the lines are being decreased[new
products] are no longer being taken up. A reduction of listings and promotional
expectations, despite co-op funds in the trading terms, is leading to an unsustainable
example is where the costs of fuel, freight, gas, labour, raw materials,
packaging, trading terms and utilities have all increased. ...Nearly 50 branded
products were on the shelves five years ago nationally, and they are now down
to approximately 15. Own-brand competition is priced, obviously, at a medium to
low level—and they are generally imported. There is less choice of branded
product for consumers, and there is a lack of negotiation with suppliers
regarding changing terms. My last example is of an over 20 per cent decrease in
recommended retail price over the last five years. There has been an increase
in promotional spend expectation of nearly 50 per cent.
Lenne of Fruit Growers Victoria Ltd detailed the reluctance of the organisation
to deal directly with the supermarkets despite being a collective:
not personally approached them. ...Individuals like us would not even get through
the door...I have had it said to me before, ..., 'We'll buy our food from overseas;
from other countries.' I hope that they do not believe it.
Wilson of Fruit Growers Victoria Ltd suggested that 'the majors have an
aversion to talking to industry associations' as it costs money and by dealing
with a 'preferred supplier chain they can play one off against the other'. Mr Wilson further explained the
difficulty of negotiating as a collective:
resist and go straight to the Trade Practices Act, which says that it is
anticompetitive to deal only with collectives. We make approaches to and work
with major packers on the fresh fruit side to try and maintain some sense in
the marketplace. But it is very difficult, because all you need is one player
who, under financial pressure, succumbs and then you will have a cave-in effect.
That has happened recently with the Coles campaign for cheaper permanent prices
David Hughes explained that some firms will have the ability to push back but
that that is dependent on size and 'countervailing power'.
these concerns were raised with both Coles and Woolworths, they detailed that
there was no possibility that such behaviour should be occurring and emphasised
to the committee the value they place on developing their relationships within
the supply chain.
is concerned by the evidence that it received throughout the duration of its
inquiry, particularly the conflicting evidence from processors and retailers
concerning the negotiation process. The committee recognises the need to find
an effective means of investigating and resolving the types of allegations made
to the inquiry. Importantly, the committee notes the current process being
undertaken by the ACCC to look more closely at market structures in the
supermarket sector and appeals to suppliers to approach the ACCC with their
and misuse of market power
explained to section 46 of the CCA, relating to the misuse of market power, in
the following terms:
three elements that must be proven in order to establish a breach of the misuse
of market power prohibition in subsection 46(1), that:
respondent has a substantial degree of power in a market (which has essentially
been interpreted as a freedom from competitive constraint);
respondent took advantage of that power (acted in a manner that it would not
have acted were it subject to competitive pressures); and
- the conduct
had the purpose of:
or substantially damaging a competitor;
entry to a market; or
- preventing or
deterring a person from engaging in competitive conduct in that or any other
noted the unconscionable conduct provisions in the CCA, which prohibit a
corporation from engaging in conduct that is 'in all the circumstances'
taking effect from 1 January 2012 unified sections 21 and 22 of the Australian
Consumer Law (formerly sections 51AB and 51AC of the Trade Practices Act
1974) into a new consolidated section of the Australian Consumer Law and
inserted a list of interpretative principles In relation to the former section
51AC the ACCC has in recent years had a number of successful cases before the
further explained that the amendments will assist its ability to investigate
'systemic or widespread unconscionable conduct concerns', but that as the
amendments are 'relatively recent it may take some time for concerns to arise
and matters to then be brought before the courts'.
submitters to the inquiry shared Treasury's view that concentration does not
'necessarily indicate that incumbent firms have market power.' In fact, Ms Kate
Carnell, Chief Executive of the AFGC, went as far as to suggest that:
is market failure in this space at the moment. One of the things about market
failure is that, where you have such an imbalance in power, the people with no
power are not game to say anything. ... At the moment, with the ACCC legislation,
unconscionable conduct is almost impossible to prove unless you can prove they
actually set out to send you broke. Coles and Woolies are [not] setting out to
send our members broke, [so] it is almost impossible for our members to win.
emphasised the need for action:
years' time,, we will be talking about when we used to have a food
manufacturing industry in Australia and how unfortunate it was that it closed.
...We have got a good example of what happens if you take your eye off the ball.
When asked if
it is inevitable that once a certain level of concentration among a few players
is reached, it leads to behaviour that would be seen as unfair, or a misuse of
market power, Professor Hughes stated:
I do not
think there is a point when you suddenly tip into that position... this is not
academic or scientific... as companies, whether they be suppliers or retailers,
gain more market power then often as not that becomes associated with
arrogance—the arrogance of market power—and there is likely a predilection for
abuses. ...My view is that, wherever you have intense retail concentration, you
will have abuses. Large scale retailers consist of individuals, buyers and if
you give individuals a lot of market power on occasions they will abuse that
power. That is exactly why there should be regulations.
Hughes remarked that the question of what is an acceptable level of retail
concentration is a 'constant topic of conversation' at the political level.
The effect of
vertical integration on horizontal competition was considered by the ACCC in
its 2008 Grocery inquiry. The report stated:
considers that competition and efficiency concerns are only likely if
horizontal competition is weak at any of the vertical stages, resulting in
sellers having market power at that stage.
The ACCC went
on to explain that at that time, in 2008, it had:
little firm evidence of such a situation prevailing at any level below the
retail level, but has not been able to investigate all market participants
involved with the supply chains for the thousands of standard grocery products.
notes the ACCC's findings, as set out in the 2008 report:
assessing the efficiency of the supply chain, the ACCC has therefore examined
the horizontal competition at the various functional levels as well as the
vertical relationships between parties in different functional levels... the ACCC
considers that concerns about potential impediments to the efficient supply of
groceries to consumers are only likely to be realised if market power exists in
any of the functional levels of the supply chain. Market power is more likely
to exist where there are high barriers to entry, high levels of concentration
and limited import competition. In the absence of market power, the ACCC is
confident that the supply chain would deliver groceries to consumers in an
efficient manner, which would result in greater choice and lower prices for
legislative change required?
asked various industry participants what they would like to see done to address
their concerns that the big retailers are engaging in anti-competitive
practices in grocery retailing. Witnesses suggested that the CCA urgently
view was that the current legislation needed to be toughened to address what it
viewed as anti-competitive practices within the supermarket duopoly.
While acknowledging there was 'nothing illegal' about the creeping acquisitions
which had given rise to Coles and Woolworths controlling around 80 per cent of
the retail food and grocery market, the supermarkets' current practices were
said to be 'systematically destroying the industry'.
concern about how creeping acquisitions were affecting not just the food
industry but other sectors, the AMWU commented:
duopoly is moving into other areas at a rapid pace, so the same effect that is
occurring in the food industry will occur in those other industries that they
are moving into—petrol, hotels, pharmaceuticals and all of those areas—unless
there is some sort of consideration given to how you stop the process of
creeping acquisitions ending up in the situation where you no longer have
effective competition in a sector of industry.
The WFA also
suggested that the government could look at the issue of creeping acquisitions:
by Coles and Woolworths has occurred by creeping acquisitions. In the European
Union, for example, two major retailers wanted to join forces and it was
disallowed because it would have given them a market share of 60 per cent. If
it was 10 per cent here and 10 per cent there it would have been over the 60
per cent. So it is just a matter of how those creeping acquisitions build to a
The WFA also
highlighted the CCA's heavy emphasis on the consumer and suggested that perhaps
the 'pendulum' has shifted too far in favour of the consumer:
Competition and Consumer Act is very heavily dominated towards consumers, to
ensure that consumers get the best deal—which we understand and respect.
However, as I said earlier, there are big question marks over the nature of the
product as it comes through and it does start to undermine some of the
integrity that we have set up around the manufacture of our product and it does
ultimately affect choice in terms of the product going through to consumers. I
guess the other point to make is that there are industries that sit behind the
value chain and they are suffering because of the domination of the major
retailers.... We think that the balance has shifted. The pendulum has shifted way
too much in favour of those consumer issues. That plays right into the hands of
the major retailers and so the industry issues are not being considered
Australian Dairy Industry Council (ADIC) similarly suggested that changes to
the CCA were necessary and suggested that 'a definition of unconscionable
conduct be inserted into the Act...an 'effects' test be reintroduced; and a
statutory duty of good faith be enacted as part of the Act'.
notes the recent amendments to consumer law that will enhance the ability of
the ACCC to investigate claims of unconscionable conduct. However, the
committee maintains that these provisions within the CCA, particularly the
provisions relating to misuse of market power, should be given specific
attention in a review of the CCA.
The review of
the CCA should consider the inclusion of the functions of a food supply chain
ombudsman within the ongoing role of the ACCC.
Calls for a mandatory code of
to suggestions that the CCA be amended, the committee heard calls for a
mandatory code of conduct to apply to grocery retailers.
suggested the introduction of such a code, with oversight by a supermarket
considers a greater commitment to fair business practices and equitable risk
and return along the supply chain would be enhanced by introducing a
co-regulatory Supermarket Fair Trading Code of Conduct overseen by a
Supermarket Ombudsman. The Code would provide guidance on acceptable approaches
for negotiating trading terms and contracts. Applicable to retailers with
greater that $1b p.a. turnover it would limit the power of the supermarkets to
extract unreasonable additional funds from suppliers beyond original
contractual agreements. The Ombudsman would arbitrate disputes arising from
trading practices not consistent with the Code of Conduct.
Griffin, Chairman of the Australian Dairy Industry Council, supported the
AFGC's calls for a mandatory code of conduct, as did Food South
transparency is really a key issue in all of this. You have your input costs
going up and your retail prices or margins are sustained, but it is that middle
manufacturing and processing area that is losing out. I think any code of
conduct probably needs to be mandatory. I think voluntary codes of conduct do
not appear to be working. For example in the olive oil industry ...[T]here has to
be an efficient mechanism by which there is the transparency and that gives
food manufacturers a fair go.
about the AFGC proposal for a mandatory code of conduct, Treasury responded:
would be aware, mandatory or voluntary codes can be prescribed in the CCA. Our
experience—and we have some reasonably firsthand experience—is that it is
generally better if the industry itself can come to some sort of arrangement
rather than the government first proposing it and the parliament, if they
agree, passing laws to have such prescribed codes. Some of the reasons why
there is likely to be a greater net benefit in self-regulation are that the
participants can tailor-make the codes to their own business conditions and
practices. Self-regulation is likely to lead to lower compliance costs on the
businesses than if bureaucrats, the government and the parliament, in its
greater wisdom, impose a set of conditions on them. It is likely to be more
flexible. Another reason is that self-regulation does not impose costs on the
public purse, essentially, which have obviously got to be funded by taxpayers
notes the evidence it received from the Product and Grocery Industry Ombudsman
(PGIO) and suggests that the effectiveness of the Code and the PGIO is somewhat
limited. The committee took evidence that there is strong support from
agribusiness, processing and manufacturing industries for a mandatory
Supermarket Fair Trading Code of Conduct or similar, overseen by a Supermarket
Ombudsman. In this context, it notes the following comments from the National
Secretary of the AMWU:
In the short term we would certainly like to see the ACCC be
given the powers to deal with the issues when they collect the evidence. People
in the industry who are already reluctant to give evidence because of the
impact it may have on their businesses will certainly not give evidence when
they know that, even if they do, no constructive action can be taken arising
from that evidence. So we would like to see some changes to that legislation in
the short term to allow the ACCC to deal with those issues.
...There have been proposals for industry ombudsmen and a
number of other suggestions. We are open to any of those suggestions which
would allow for greater oversight of what goes on in the industry—the exposure
of the practices that take place on a daily basis, which are threatening not
only jobs and the manufacturing industry itself but also our ability as a
nation to feed ourselves.
takes the view that the introduction of a mandatory code and an ombudsman,
without first investigating why the existing ombudsman is not effective, would
simply add cost and regulatory burden to the industry.
challenges confronting the industry, the committee considers that there are
opportunities for processors and suppliers. The committee agrees with the view
of Professor Hughes that suppliers have a responsibility to know a lot more
about consumers and their shoppers than they do at the moment and should
develop more export expertise. The committee acknowledges that this is not
always easy as it requires resources that may not be available to smaller
companies. However, this investment may help balance out the power within the
supply chain and provide diversity, giving food processors much needed
countervailing power. The committee suggests that the ability of the food
processing sector to keep in-step with the continually evolving market would
also be aided by such investment.
advised the committee that the behaviour of the supermarkets is currently an
area of interest to it, although it is still in the process of forming a view
in relation to issues that have been raised and the relevant legislative
last appearance our chairman, Rod Sims, has publicly commented on our interest
in matters concerning supermarkets in particular, and that is reflected in the
new compliance and enforcement policy that was published earlier this year
where we set out a number of priorities for the ACCC over the next period. They
included considering competition and consumer issues in highly concentrated
sectors. We particularly named supermarkets as being an area of interest. ....
sought in various forums people to come forward, particularly suppliers, even
on a confidential or anonymous basis, to assist us to get a better feel for the
issues out there. I am happy to note that we have had a number of approaches in
light of those calls. That is greatly assisting the ACCC to get on top of the
issues that we have seen in the marketplace and that we have commented on
publicly. We are turning our minds to those issues to see, first of all,
whether they can be considered under the provisions of the Competition and
Consumer Act. Even more generally, we are just forming a view in relation to
welcomes this recent development and eagerly awaits the ACCC's announcements
concerning its activities. In light of the ACCC's announcement, the committee
considers that the time for processors to present their concerns to the ACCC is
now. The committee accordingly urges food processors to approach the ACCC and
provide evidence of the concerns they have raised with the committee to the
ACCC so that the anecdotal evidence that has been provided to the committee can
notes that the Senate Economics References Committee's report on The impacts
of supermarket price decisions on the dairy industry, recommended that the
government initiate an independent review of the competition provisions of the Competition
and Consumer Act 2010. The government, however, declined to initiate a
review until the law is further tested by the ACCC in the courts. While the
committee supports further action by the ACCC, it considers that the
experiences of the food processing sector since the release of the Dawson
Report in 2003 make the case for a review even stronger.
recommends that the government initiate an independent review of the
competition provisions of the Competition and Consumer Act 2010. The
committee recommends that the review should include consideration of:
- the misuse of market power;
- predatory pricing; and
- unconscionable conduct.
recommends that the review of the CCA consider the inclusion of the functions
of a food supply chain ombudsman within the ongoing role of the ACCC.
The committee notes that over recent years, supermarkets have published
and expected suppliers to comply with corporate and social responsibility
standards. It is appropriate that supermarkets also comply with standards as
they relate to the treatment and satisfaction of those who supply them with
their products. The committee recommends that the major supermarkets in Australia
voluntarily compile and establish benchmarks within their corporate social
responsibility documents to measure the level of satisfaction of their
suppliers in dealing with the supermarkets. This framework needs to be
supported by the use of external agencies to conduct regular supplier
satisfaction surveys, the results of which should be publicised by the
supermarkets in their regular reporting cycles. The committee believes that
such a system would not only highlight the importance of the supermarkets'
treatment of their suppliers; it would also encourage the supermarkets to value
and respect their relationship with suppliers and to respond constructively to
their suppliers' feedback.
The committee recommends that the major supermarkets in Australia
voluntarily compile and establish benchmarks within their corporate social
responsibility documents to measure the level of satisfaction of their
suppliers in dealing with the supermarkets. External agencies should be engaged
to conduct regular supplier satisfaction surveys, the results of which should
be publicised by the supermarkets in their regular reporting cycles.
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