Communist Party of Australia

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Issue #1621      December 4, 2013


The wildfire spread of self-regulation

Fourteen months of on-again, off-again negotiations between Coles and Woolies on one side and the Australian Food and Grocery Council on the other have brought forth another entirely voluntary code of conduct for the big two retailers and their suppliers. The monopoly operators dodged the threat of an ombudsman to regulate an industry plagued by complaints of anti-competitive practices and bullying of suppliers. The Abbott government is pleased with the outcome. It is an early indication of the hands off approach the federal government will be taking in its promised “root and branch” review of competition laws.

Parliamentary Secretary to the PM, Josh Frydenberg, has been instructed to cut $1 billion worth of “red tape” costs from the government’s bottom line. Regulation and oversight cost money so self-regulation and voluntary codes are going to spread like wildfire in the Abbott era.

“These are the types of action that we welcome because it’s a voluntary code, which helps build faith in the industry, not red tape,” Mr Frydenberg said about the outcome of the negotiations. “The message we have been getting is that major companies are very keen to push the red tape agenda.” And the Abbott government is at one with big business on this and every other burning issue facing the people of Australia.

The code of conduct for the supermarket giants needed a cloak of decorum. Coles and Woolworths will appoint a compliance officer and report on adherence every six months. They will show suppliers the principles guiding the allocation of shelf space. They promise not to pinch brand name product ideas for the development of their own private label lines. They won’t change the terms of supply contracts retrospectively or push the cost of store theft or shrinkage back onto suppliers. They won’t take payments for stocking items, securing shelf space or promoting products as they did in the past. We’ll see.

The National Farmers Federation hasn’t endorsed the pact. The Victorian Farmers Federation still wants the Australian Competition and Consumer Commission (ACCC) to have divestiture powers over the players and clearer definitions of what is abuse of market power. It points out that the previous voluntary code was a flop for everyone except the big two supermarkets. Why would this one be any different?

The ACCC is continuing its investigations into the big two to determine if they engaged in “unconscionable conduct” with their suppliers or “misusing their market power” by discriminating in favour of their own brand products. The Commission is a very late convert to the cause of investigating the sector.

Previous ACCC chairmen have sworn there is nothing wrong with the status quo while everybody else could see clearly that suppliers and consumers were being manipulated. Macquarie Bank estimates that there has been a $1 billion profit transfer from suppliers to the supermarkets over the past three years. The recently hatched voluntary code is not going to address that sort of market muscle.

A supplier, who preferred to remain anonymous, told The Australian Financial Review that sooner or later something would have to give. “If things don’t improve, whoever is enforcing it will be given more powers, as we’ve seen in the UK where there is now an ombudsman.” The sentiment is reasonable but it ignores the fact that, despite their verbal gymnastics, Australian governments represent the interests of big business. As in the UK, they won’t intervene in the affairs of the monopolies unless they are absolutely forced to by a united front of the people they exploit.

Until that is achieved, big business will keep pressing its advantage. In retail they will keep driving family businesses to the wall, squeezing suppliers and pushing for the complete deregulation of shopping hours as recommended by the federal government’s Productivity Commission. The Abbott government’s policy trajectory is predictable; the response needs to be strong.

Next article – Sheridan workers in Port Adelaide score a win

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