Chapter 1

Introduction

Referral and summary of the Bill

1.1        On 13 September 2011, Senator Nick Xenophon introduced into the Senate the Constitutional Corporations (Farm Gate to Plate) Bill 2011 [No. 2] (the Bill).

1.2        The stated object of the Bill is 'to enable consumers to understand the pricing practices of grocery retailers': clause 3. 

1.3        In brief, the Bill requires major retailers to display the average farm gate price received by farmers for each type of fresh fruit or vegetables produced within
a specified 12-month period: clause 9(1). This is known as the producer price.
The provisions of the Bill are discussed in more detail in Chapter 5 of this Report.

1.4        In the Second Reading speech, Senator Xenophon set out the purpose of the Bill:

The aim of this Bill is to require grocery retailers to display the farm gate next to the retail price, so that consumers can see how much profit each retailer earns for each product.

...

Farmers and growers deserve to get fair prices for their produce and consumers deserve to know what they're paying for.[1] 

1.5        On 15 September 2011, the Senate referred the Bill to the Economics Legislation Committee for inquiry and report by 24 November 2011.

Conduct of the inquiry

1.6        The committee advertised the inquiry in The Australian and on its website. The committee also wrote to relevant industry groups, stakeholders and Commonwealth departments and agencies inviting submissions.

1.7        The committee received 15 submissions, which are listed in Appendix 1. The submissions received were predominantly from bodies representing producers and generally supported the intention behind the Bill but questioned its implementation and whether it would have the intended effect. 

1.8        A public hearing was held on Tuesday, 15 November 2011 in Canberra. Evidence was heard from five organisations. Only one of those witnesses supported the Bill. The others raised concerns similar to those raised in submissions, which are dealt with in detail in Chapter 4 of this report.

1.9        The difference between the prices paid to farmers for their products and retail prices has been examined twice before.

1.10      In 2003, the then Minister for Agriculture, Fisheries and Forestry,
the Hon. Warren Truss MP, initiated an inquiry into price determination. This project was conducted by Whitehall Associates, on behalf of the Department of Agriculture, Fisheries and Forestry. In 2004, Whitehall Associates produced its report,
Price Determination in the Australian Food Industry (the Whitehall Associates Report).[2] 

1.11      On 22 January 2008, the Hon. Chris Bowen MP, then the Assistant Treasurer, instructed the Australian Competition and Consumer Commission (ACCC) to hold
a public inquiry into retail prices for standard groceries. The ACCC forwarded
the report of its inquiry, Report of the ACCC inquiry into the competitiveness of
retail prices for standard groceries (the ACCC Report), to the government on
31 July 2008.[3]

1.12      Both of these reports canvassed issues relevant to the Bill, as part of their wider consideration of prices. The committee was able to utilise the information contained in them in its inquiry.

Outline of the report

1.13      This report is divided into six chapters:

• Chapter 2 sets out the reasons for the introduction of the Bill.
• Chapter 3 examines the supply chain for fresh produce from producer to consumer, an understanding of which is felt necessary to a consideration of how the Bill might operate.
• Chapter 4 reviews evidence obtained by the committee in relation to the Bill.
• Chapter 5 reviews its provisions and looks at how the Bill might be implemented, including likely practical problems that would be inimical to it operating effectively and efficiently.
• Chapter 6 contains the committee's assessment of the Bill and the process by which the Bill was introduced into Parliament.

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