Chair's Additional Comments

Introduction

1.1As Chair I would like to thank everyone who participated in this inquiry, including through providing a submission, appearing at a hearing, submitting confidential information to the committee and to my office, and engaging with the inquiry through social media channels.

1.2I would also like to thank the members of the committee for their collaborative engagement throughout the inquiry, and the secretariat for its support for the committee.

Divestiture powers

1.3I note the committee recommended the Australian Government create divestiture powers specific to the supermarket sector.

1.4I also note the committee was unable to agree whether the Senate should pass the Australian Greens'Competition and Consumer Amendment (Divestiture Powers) Bill 2024 that would introduce economy-wide divestiture powers into Australia's competition law.

1.5Whilst the Greens support the creation of divestiture powers that would apply to the supermarket sector, we strongly prefer economy-wide divestiture powers to improve competition and bring down the cost of essential products and services across the economy.

1.6An economy-wide divestiture power as proposed by the Competition and Consumer Amendment (Divestiture Powers) Bill 2024 would allow the Courts to order a firm to divest assets to reduce its market share, where a firm has been found to have misused its market power. This would provide a powerful stick to disincentivise firms from using their market power to price gouge consumers and engage in anti-competitive behaviour. Where a firm was required to divest assets, it would lead to greater competition in an industry which, under accepted economic analysis, would bring down prices for consumers.

1.7Australia has one of the most concentrated supermarket sectors in the world, with Coles and Woolworths together holding 65percent share of the market. However, market concentration is not an issue unique to the supermarket sector, with many industries across the Australian economy becoming increasingly concentrated, including in the banking, airline, energy and telecommunications sectors.

1.8Treasury analysis shows that the market power of Australia's largest firms across the economy has increased in the last two decades. This has coincided with higher price markups and sluggish productivity. Average firm mark-ups in Australia increased by around six per cent between 2004 and 2017.

1.9This high level of market concentration has contributed to the inflationary cycle Australians have experienced since the COVID-19 pandemic began. At SenateEstimates in February this year, Reserve Bank Governor, MsMicheleBullock agreed that some firms are using a lack of competition and the cover of high inflation to hike prices above what would be required to meet increases in their input costs.[1]

1.10The inquiry received overwhelming evidence that everyday Australians are increasingly struggling to afford to buy food as the price of groceries have skyrocketed in the last few years.

1.11However, the evidence provided to the inquiry was clear that whilst the cost of groceries is impacting everyday Australians, this is not happening in isolation. Instead, the high cost of food needs to be addressed in the context of the escalating cost of many essential goods and services, including rents, mortgages, energy bills, insurance, and medical services. As Mr Owen Gregory from Grassroots Action Network Tasmania observed:

… between cost-of-living costs such as continuously increasing rent prices, fuel prices, energy and heating bills going up, there's less you can spend on groceries or that you have left in that allowance each fortnight, and the prices seem to increase.[2]

1.12Economy-wide divestiture powers were supported by a clear majority of witnesses that provided relevant evidence to the inquiry including, ProfessorAllan Fels, Associate Professor Andy Schmulow, ProfessorJohnQuiggin, the Australia Institute, Per Capita, the National Farmers Federation Horticultural Council, and TasFarmers.[3]

1.13Mr Matt Grudnoff from the Australia Institute supported economy-wide divestiture powers, noting:

We think divestiture powers are a good idea, and the main reason is the ACCC, as it currently stands, has very few powers to actually inject competition into a market that is already low in competition.[4]

1.14Associate Professor Andy Schmulow also called for divestiture powers, stating:

So what is the solution to excessive market concentration? The answer lies in refreshing, rejuvenating, renewing and revitalising our free market by introducing choice and competition. That requires the power to break up monopolies, duopolies and oligopolies. While Dr Emerson's solution to make the code of conduct mandatory is helpful and no doubt will afford some benefits, it fails to grasp the nettle, and the nettle is divestiture. This is not radical. It's standard practice in many other leading G20 jurisdictions and has been for decades.[5]

1.15Not a single witness to the inquiry who supported divestiture powers, stated that divestiture powers should apply solely to supermarkets, rather than broadly across the economy. Former Australian Competition and Consumer Commission Chair, Professor Allan Fels indicated:

I've long been of the view that our competition laws should include a power of divestiture for all businesses and that it should only apply if a business has been found in a court of law to have breached the competition provisions of the law, especially section 46, which prohibits misuse of market power …[6]

1.16An economy-wide divestiture power would also bring Australia's competition policy in line with comparable international jurisdictions. Economy-wide divestiture powers are a standard part of the competition toolkit of most so‑called free market economies around the world. The United States of America has had divestiture powers for over 130 years, and these have been used effectively to reduce the market power of companies in a range of industries, notably including the break-up of the AT&T telephone monopoly in the 1980s. The United Kingdom also has economy-wide divestiture powers.

1.17That the Senate pass the Australian Greens' Competition and Consumer Amendment (Divestiture Powers) Bill 2024.

Senator Nick McKim

Chair

Greens Senator for Tasmania

Footnotes

[1]Ms Michele Bullock, Governor, Reserve Bank of Australia, Senate Economics Legislation Committee Hansard, 15 February 2024, pp. 11–12.

[2]Mr Owen Gregory, Community Member, Grassroots Action Network Tasmania, CommitteeHansard, 7 March 2024, p. 2.

[3]See: Professor Allan Fels AO, Private capacity, Committee Hansard, 15 April 2024, p. 1; AssociateProfessor Andy Schmulow, Private capacity, Committee Hansard, 16 April 2024, pp. 80–81; Professor John Quiggin, Private capacity, Committee Hansard, 11 April 2024, pp. 35–36; MrMattGrudnoff, Senior Economist, and Dr Greg Jericho, Chief Economist, The Australia Institute, Committee Hansard, 11 April 2024, p. 27–29; Ms Sarah McKenzie, Director, Policy and Research, and Ms Emma Dawson, Director, Per Capita, Committee Hansard, 11 April 2024, p. 21; MrJeremy Griffith, Representative, National Farmers Federation Horticultural Council, CommitteeHansard, 7 March 2024, p. 18; Mr Nathan Calman, Chief Executive Officer, TasFarmers, CommitteeHansard, 7 March 2024, pp. 27–28.

[4]Mr Matt Grudnoff, The Australia Institute, Committee Hansard, 11 April 2024, p.27.

[5]AssociateProfessor Andy Schmulow, Private capacity, Committee Hansard, 16 April 2024, p. 76.

[6]Professor Allan Fels AO, Private capacity, Committee Hansard, 15 April 2024, p. 1.