Chapter 6

Committee view

6.1        Based on the evidence obtained by the committee during its inquiry, as well as information otherwise available, the committee has reached a very strong view that, for the reasons set out below, the Bill should not be passed.

6.2        In reaching this conclusion, the committee has considered the following questions:

• Does the Bill address an existing problem?
• Assuming that the answer to these questions is yes, can the framework set out in the Bill be implemented and enforced in an efficient manner?
• Can any drafting flaws with the Bill be addressed simply and without undue delay?

Does the Bill address an existing problem?

6.3        It should, firstly, be noted that the committee feels that the problem the Bill seeks to address and how it will do so have never been clearly articulated by its promoters. The Bill variously has been framed as one relating to:

• transparency in the pricing policies of major retailers;[1]
• empowering consumers to make informed choices on purchases;[2]
• providing assistance to smaller fruit retailers in competition with major supermarkets;[3]
• addressing the market power of Coles and Woolworths;[4] and
• in some as yet unexplained way, reducing the gap between the farm gate and retail prices of fresh produce.[5]

6.4        In the committee's view, this lack of clarity is a symptom of the lack of preparation before the Bill was introduced into the Senate.

6.5        Regardless of this uncertainty, for the purposes of its inquiry the committee has assumed that the aim of the Bill is to ensure that farmers receive a fair price for their produce, as stated in Senator Xenophon's second reading speech.

6.6        The committee has heard evidence that the gap between farm gate and retail prices for fresh produce is not caused by the actions of the major retailers, at whom the Bill is specifically aimed. It has also heard evidence that, owing to the nature of the supply chain as described in Chapter 3, the display of a producer price by itself will not increase transparency in relation to that process or make the major retailers pricing policies any clearer. This evidence has come from producers and producer representative bodies, as well as from retailers.

6.7        Supporters of the Bill have tended to frame their support in general terms, speaking about the need for action that will assist farmers and create transparency, but have almost invariably followed it up with criticisms of the actual remedy proposed by the Bill.

6.8        The evidence obtained by the committee indicates overwhelmingly that the problem the Bill seeks to address either does not exist or is at least extremely contentious. On that basis, the committee cannot recommend that the Bill be supported.

6.9        The committee's view that the Bill does not address an existing problem should be enough to conclude this matter. Nonetheless, for the sake of completeness, the committee will address the other questions about the Bill it considered.

Can the framework set out in the Bill be implemented and enforced in an efficient manner?

6.10      The evidence obtained by the committee suggests that the primary difficulty with the Bill relates to how the retailer will calculate the producer price. Under the Bill, the producer price is based upon the farm gate price received by farmers for their produce. In theory, this should be a straightforward enough matter – each farmer would be expected to know the price he or she receives for their produce.

6.11      However, the evidence shows that this is not so simple. In the view of some witnesses and submitters there is, effectively, no such thing as a producer price, at least as it is defined in the Bill. Most submissions and witnesses that accept there is a farm gate price are quite clear in explaining that it would be extremely difficult to accurately calculate that price.  

6.12      These problems are further exacerbated by a lack of clarity in the Bill as to how the 12-month period is to be determined and how regularly prices are to be updated. 

6.13      It could be argued that although these are significant concerns, they are practical problems. As such, they cannot be said to be insurmountable. However, the evidence quite clearly indicates that any such system is likely to be extremely complex and place a significant additional burden on farmers, as it would require retailers to be able to identify the price paid to any particular producer over an evolving 12 month period as well as the stores stocking that produce.

6.14      For these reasons, the committee believes the Bill could not operate in an economically efficient or practical manner and may, in fact, have the adverse consequence of increasing the producers' costs, with no evidence it will improve the prices they receive.

6.15      In summary, the committee's view is that the evidence it has received clearly indicates that there are substantial problems with the Bill at every level, in relation to:

• the determination of a producer price;
• the unintended adverse consequences of the Bill for producers that would likely outweigh any benefit, however, slight that might be;
• the potentially misleading nature of a producer price;
• the lack of evidence that the problem identified by the Bill exists;
• if the problem does exist, the Bill may not be the correct response to that problem; and
• the serious concerns of the ACCC about its capacity to enforce the Bill.

Can any drafting flaws with the Bill be addressed simply and without undue delay?

6.16      Chapters 4 and 5 detail the evidence obtained by the committee that highlights major flaws with the drafting of the Bill. Chapter 5 includes an analysis of how the Bill might operate.

6.17      The committee is of the view that, based on this evidence, the flaws with the Bill cannot be remedied by amendments. Rather, it believes the Bill would have to be redrafted from scratch to provide a system that could be implemented in an economically rational and simple manner.

Further committee comments

6.18      The committee would like to place on record its belief that the evidence it has obtained, and upon which the above views are based, can only lead to the conclusion that there has been a lack of proper policy development and consultation on the part of the sponsors of the Bill.

6.19      It would be redundant to go over the many criticisms of the Bill contained in the evidence obtained by the committee. They are set out in detail primarily in Chapter 4 of this Report. It is sufficient to note that the Bill received only the slightest support, even from those it was intended to assist, and much of that support was grudging and guarded.

6.20      In the view of the committee, the comprehensive and convincing nature of those criticisms of the Bill would have been made obvious after even a minimum degree of discussion with retailers, producers and other stakeholders.

6.21      Moreover, the concerns raised by the sponsors of the Bill, as expressed in media statements and Senator Xenophon's Second Reading speech, were explored in depth by Whitehall Associates and the ACCC in 2003 and 2007, respectively. Their reports made it clear that the simplistic approach of a producer price, as espoused in the Bill, was not going to have the result desired by Senator Xenophon and the Hon. Mr Katter.

6.22      The committee appreciates that the proponents of the Bill acted with the best intentions in bringing this Bill forward.  However, it firmly believes that these issues should have been addressed before the Bill was introduced. All the evidence it has obtained shows that the Bill was brought before Parliament with a haste which was inappropriate to the serious subject matter its proponents sought to address.

Recommendation 1

6.23      The committee recommends that the Senate reject the Bill.

 

Senator Mark Bishop
Chair

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