Problematising supermarket–supplier relations: dual perspectives of competition and fairness

ABSTRACT

The power asymmetry between major supermarket chains and suppliers in Australia and abroad has been analysed largely through an economic lens, focused predominantly on consumer prices. This article takes a wider stance, considering both the economic and the social perspectives that infuse debates relating to the supermarket treatment of their suppliers. The two perspectives are not, as they first appear, disconnected or in conflict. Rather, as with many socio-economic interactions, they are connected and interdependent. Applying a problematisation analysis, we explore the ways in which issues relating to the imbalance in bargaining power between major supermarkets and suppliers have been framed in policy dialogue, and then examine the implications of such framing for regulatory responses. On our analysis, the problem that this imbalance is seen to pose has dimensions of both competition and fairness. It is thus a problem that can be tackled by appealing to the platforms of both the left and right of politics. A dual response also facilitates effective political risk management. While a neoliberal approach allows government to be seen as promoting competition to maximise efficiencies and consumer welfare, tough measures on socially unacceptable behaviour enables government to align with important social-cultural values.

KEYWORDS:

• Law
• socio-legal studies
• Supermarkets
• Competition
• Fairness

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Caron Beaton-Wells is a Professor specialising in competition law at the Melbourne Law School and Director of the University’s Competition Law & Economics Network. Her research and teaching in this field extends beyond the law to institutional, political and sociological dimensions of competition regulation, and her recent research projects have focused on cartel criminalisation, supermarket power, petrol pricing and the interface between competition and consumer law. Caron has been Associate Dean of the Law School’s undergraduate and master’s programs, and is currently program director for the School’s first fully online master’s program, in global competition and consumer law. Her engagement activity involves contributing to the public discourse in Australia and around the world on significant competition law-related issues and on bringing together and fostering constructive debate and shared learning amongst stakeholders. Caron is a member of several national and international editorial and advisory boards, has consulted to the OECD, ASEAN, SSNED and the New Zealand Government, is a non-governmental advisor to the ICN and the Law School’s representative on UNCTAD’s Research Partnership Platform. Formerly a solicitor at (now) King & Wood Mallesons, Caron is also a member of the Law Council of Australia's competition and consumer committee and a member of the Victorian Bar.

Jo Paul-Taylor is a Research Fellow at the Melbourne Law School and holds a Bachelor of Psychology UWA, Master of Arts (History) UNSW and Master of Laws (JD) from Monash University.

ORCID

Caron Beaton-Wells http://orcid.org/0000-0001-8577-7350

Notes

1 See eg Burch et al (2013).

2 See eg Burch and Lawrence (2005), pp 1–2; Dixon and Isaacs (2013), p 2.

3 See generally House of Representatives Standing Committee on Industry, Science and Technology (1997); Joint Select Committee on the Retailing Sector (1999) (‘Baird Committee Report’).

4 See eg ACCC (2008); SGS Economics and Planning (2010); Senate Economics References Committee (2011); Select Committee on ACT Supermarket Competition Policy (2012); National Farmers Federation et al (2014); Harper et al (2015) (‘Harper Review’); Senate Economics Legislation Committee (2015); Commonwealth of Australia (2015).

5 See eg Taylor (2015), http://www.abc.net.au/news/2015-06-30/coles-supermarket-pays-12-million-to-suppliers/6583524; ‘Suppliers Argue Coles and Woolworths' Demands Unfairly Help Private Label Push’, Australian Financial Review, 27 January 2016.

6 See Part D below.

7 Much of the public exchange has been in relation to proposed changes to Australia’s misuse of market power prohibition in its competition law (discussed in Part D(I) below). See eg ‘BCA Warns Small Business about Harper Changes’, Australian Financial Review, 17 July 2015; ‘Goyder Joins Samuel in War over ACCC Powers’, Australian Financial Review, 12 January 2016. See also the discussion of the politicking that has accompanied this proposal in Fels (2016).

8 Problematisation of a topic, issue or situation involves a process of critical thinking or pedagogical dialogue that stands back from and seeks to demythicise the matter, to deconstruct what appears to be the assumed or common knowledge surrounding it, and examine its elements in a broader context (as distinct from simply identifying its advantages and disadvantages). It is a process that poses such assumptions or knowledge as a problem, enabling fresh insights and potentially transformative responses to emerge. See eg Crotty (1998); Bacchi (2012).

9 See the discussion of debates in the EU and UK, for example, in Part B(II) below.

10 In keeping with sociological approaches, as to which in the context of the early development of Australian competition law: see Hopkins (1978).

11 Polanyi, an economic sociologist and anthropologist, argued that over the course of history, different phases of embedding and dis-embedding of the economic, in and out of social relationships, can be observed: Polanyi (2001). Polanyi’s work has spawned a considerable body of secondary literature, both by way of critique and extension. See eg Lange (2011); Lange et al (2013); Lange and Haines (2015).

12 As argued in Lange and Haines (2015), Polanyi adopts more of a functionalist approach that ‘seems to suggest that the embedding or re-embedding of economic into social relationships happens automatically, as a ‘counter-movement’ that is necessary in order to maintain social order and integration within society (p 13).

13 Habermas (1989).

14 See further Haines (2011); O’Malley (2004).

15 The size and associated power, reach and practices of the MSCs have been raised in connection with a range of other more socially oriented issues, including public health, environmental damage, animal welfare, gambling addiction, worker exploitation, urban and town planning, and a breakdown in social cohesion, particularly in rural communities. These broader aspects of the supermarket controversy are beyond the scope of this article. However, it is important to recognise the way in which the breadth of the supermarket controversy and the way in which it arguably amplifies and colours the debate about treatment of suppliers.

16 In 2015 Coles and Woolworths had approximately 55 per cent of the overall grocery market (including both fresh and dry goods). By comparison, the two largest grocery firms in the United Kingdom held 41.8 per cent, in Canada the figure was 58 per cent, and in the United States, it was 42 per cent: Harper Review (2015), p 284.

17 Department of Treasury (2014), p 3.

18 Roy Morgan Research Ltd (2016), http://www.roymorgan.com/findings/7021-woolworths-coles-aldi-iga-supermarket-market-shares-australia-september-2016–201610241542, 24 October 2016.

19 Roy Morgan Research Ltd (2016), http://www.roymorgan.com/findings/7021-woolworths-coles-aldi-iga-supermarket-market-shares-australia-september-2016–201610241542, 24 October 2016.

20 At the end of 2015 Costco is reported to have had a 1.2 per cent share of retail grocery sales. Its wholesale share would be much greater. See ‘Costco’s Australian Profits Surge as Sales exceed $1 Billion’, Sydney Morning Herald, 21 December 2015, http://www.smh.com.au/business/retail/costcos-australian-profits-surge-as-sales-exceed-1-billion-20151219-glrq8f.html.

21 For a discussion of the concepts of bargaining power and buyer power, and the relationship between them, see eg OECD Competition Committee (2009); ACCC (2008), pp 310–311 para 14.2.

22 Department of Treasury (2014), p 4, n 7.

23 Department of Treasury (2014), n 8. For a recitation of similar supply chain practices elsewhere, see eg Competition Commission (2000), pp 128–129 para 2.522; Freeman et al (2008), p 164 para 9.41; European Commission (2014b), pp 3, 4–5.

24 See eg Iozzi and Valletti (2014); Chen and Sappington (2011).

25 Master Grocers Australia (2014), p 5.

26 Dixon and Isaacs (2013), p 284.

27 Parker and Scrinis (2014).

28 IBISWorld (2016).

29 The objects provision in s 2 of the CCA is so broad in its terms as to accommodate a total welfare standard. However, the emphasis in at least the most recent independent review was largely on consumer welfare: see Harper Review (2015), p 9. For a critique of the failure of the Harper review panel’s to address the scope of s 2, see Wylie (2014). Beyond Australia, see generally International Competition Network (2011), pp 9–17; OECD Global Forum on Competition Secretariat (2003), p 5 para 9.

30 See eg Trade Practices Review Committee (2003), p 29 (‘Dawson Report’); Harper Review (2015), p 15.

31 Harper Review (2015), p 287.

32 Harper Review (2015), p 287.

33 ACCC (2015), pp 26–27 para 2.4.2, p 64 para 3.7; Harper Review (2015), p 283. Compare the views of others to the effect that the Australian economy is overly concentrated: see Dahlsen (2016), pp 4–5 para 12.13; Leigh (2016).

34 ACCC (2008), p 67; Harper Review (2015), p 285. See also the recent comments of the ACCC Chairman in Sims (2016).

35 ACCC (2008), p 210.

36 ACCC (2008), p 67.

37 ACCC (2008), p xiv.

38 ACCC (2008).

39 Harper Review (2015), p 283.

40 This has taken the form of major price campaigns. See eg Coles, ‘Coles Introduces New Deeper down Prices’, https://www.coles.com.au/about-coles/news/2014/02/26/deeper-down-down, 26 February 2014; Food and Beverage Industry News, ‘Woolworths Launches its Own Price Cutting Campaign’, https://foodmag.com.au/woolworths-launches-its-own-price-cutting-campaign/, 29 May 2013.

41 Aldi’s market share increased from 5.1 per cent in 2008 to 12.5 per cent in 2016, largely at the expense of the MSCs (Coles share falling from 33.7 per cent to 33.2 per cent and Woolworths share from 40.9 per cent to 36.3 per cent). See Roy Morgan Research Ltd (2016).

42 Gilbert et al (2015), p 23.

43 Just over five years on from the ACCC inquiry, food and non-alcoholic beverage prices were tracking at 1.3 per cent compared to inflation at 2.6 per cent. See Woolworths Limited (2014), p 15, citing Australian Bureau of Statistics (2014), table 7.

44 For a recent account of the pressure on MSC earnings growth, see ‘Coles, Woolworths Look for Growth as Supermarket Wars Rage On’, The Age, 27 August 2016.

45 Harper Review (2015), p 433.

46 See Merrett and Smith (date unknown), p 10.

47 Aldi’s growth was close to the total number of Woolworths and Coles net store additions combined in all of Australia: Woolworths Limited (2014), p 9. Despite this, there have been continued calls for planning regulation to be more sensitive to competition concerns (see eg Harper Review (2015), pp 130–131 (and the text relevant to n 176 below). The tensions between planning and competition regulation are explored in Arup et al (forthcoming).

48 Woolworths Limited (2014), p 15.

49 ‘29 per cent of UK Online Grocery Shoppers are Shopping for Groceries More Online Now than a Year Ago’, Mintel Press Centre, 14 April 2016, http://www.mintel.com/press-centre/retail-press-centre/29-of-uk-online-grocery-shoppers-are-shopping-for-groceries-more-online-now-than-a-year-ago.

50 Woolworths Limited (2014), p 2.

51 Gilbert et al (2015), p 26.

52 Productivity Commission (2011), p 39.

53 ‘Lidl's Australia Plans Remain a Mystery’, Australian Financial Review, 12 June 2015, p 16.

54 ‘Australia Set for New Grocery Wholesaler’, The Age, 6 June 2016, http://www.theage.com.au/business/australia-set-for-new-grocery-wholesaler-20160603-gpb61l.html#ixzz4AkiTGyzY.

55 See further the discussion about the influence of private labels in Part B(II) below.

56 For example, Coles is reported to be aggressively reducing range, with ranging falling by more than 2 per cent over the next 12 months in dry goods, with a growing focus on allocating more space to fresh food: Gilbert et al (2015), p 18.

57 Woolworths Limited (2014), p 39.

58 Woolworths Limited (2014), p 24, reporting that 92 per cent of customers shop at more than one supermarket in a given month, in stark contrast to the low levels of switching in other retail sectors, eg banking (5 per cent), private health insurance (7 per cent), telco (16 per cent) and electricity and gas (27 per cent).

59 See eg Department of Treasury (2014), p 5.

60 Department of Treasury (2014), p 5. See also the comments of the former Minister for Small Business: Billson (2013).

61 The categories are milk, cheese, yoghurt, breakfast cereals, small goods/deli, coffee, proprietary bakery, beer and soft drinks: Woolworths Limited (2014), p 12.

62 Merrett and Smith (date unknown), pp 8, 11.

63 Concentration at the processor level is increasingly being recognised as posing challenges for the sustainability of Australia’s farming sector. In the 2008 inquiry the ACCC noted submissions that following deregulation, competitive pressures on individual growers were increasing as processors demanded lower prices: ACCC (2008), p 241. A recently announced market study by the ACCC relating to the beef supply chain focuses more on the effects of concentration amongst saleyards and abattoirs than amongst supermarkets: ACCC (2016a), pp 2–3. Also see n 113 below for a discussion of the ‘milk wars’.

64 For example, a South Australian tomato farming operation recently secured $100m in private equity funding – a result, at least in part it was said, of a contract with Coles to purchase the operation’s tomatoes for the next 10 years: ‘Sundrop Gets $100m Injection from KKR to Grow Tomatoes in SA Desert’, The Sydney Morning Herald, 4 December 2014, p 23.

65 The Coles Nurture Fund (CNF) aims to help small Australian food and grocery producers, farmers and manufacturers to innovate and grow their business. See Coles, ‘Working Together’, https://www.coles.com.au/corporate-responsibility/our-suppliers/working-together. Similarly, constituting almost two-thirds of their range, Woolworths characterises small suppliers as ‘critical trading partners’ and cites a series of examples to illustrate its commitment to supporting these suppliers in entering the market and challenging incumbents. See Woolworths Limited (2014), p 22; ‘Woolies CEO’s Mea Culpa to Suppliers’, Australian Financial Review, 2 June 2016, p 24.

66 See eg European Commission (2011), p 8; Ernst & Young et al (2014), p 34; Ezrachi (2010).

67 Gilbert et al (2015), p 16.

68 However, some research has suggested that Australian consumers are less inclined to purchase private labels than their European counterparts: Gilbert et al (2015), p 16. Moreover a 2015 Australian consumer survey reported that the growth of private label sales was starting to out-pace that of branded products, a development driven largely by Aldi, but also by the MSCs: Canstar Blue Research, ‘Private Labels vs Brand Names: The Switch Is on’, http://www.canstarblue.com.au/food-drink/stores/supermarkets/private-labels-vs-brand-names/. One report tips private labels to grow to 35 per cent in the Australian grocery sector by 2020-21: IBISWorld, ‘Supermarkets: Private Labels No Longer Just for the Budget Conscious’, http://www.ibisworld.com.au/newsletter/issues/au/10Sep/print.htm#aIndustry2, accessed 5 December 2016.

69 ‘Supermarket Chains Woolworths and Coles Struggle with Private Label Brands against Aldi’, The Age, 11 June 2016, http://www.theage.com.au/business/retail/supermarket-chains-woolworths-and-coles-struggle-with-private-label-brands-against-aldi-20160609-gpfv5b#ixzz4BVVL5G.

70 KPMG (2014), p 15.

71 Gilbert et al (2015), p 13.

72 Gilbert et al (2015), p 13.

73 KPMG (2014), pp 15, 26.

74 Gilbert et al (2015), p 11.

75 KPMG (2014), pp 15, 19.

76 Compare the questioning of these meanings in Stucke (2012), p 27.

77 See eg Fearne et al (2005); Beaton-Wells (2014).

78 See eg Green (2004). Nor is it to suggest that the public is likely to understand let alone care about the technical niceties of competition law and economics. On general public indifference to or ambivalence about economic rationales, see eg Parker (2012), p 977.

79 This argument can be situated within broader debates amongst competition law scholars regarding the role of social values – including fairness, equity and morality – in antitrust. See eg Fox (2008), p 77; Stucke (2013).

80 See eg Master Grocers Australia, ‘Fair Competition for Independents’, http://www.mga.asn.au/industry-concerns/fair-competition-for-independents; Small Business Council of Australia (2016).

81 Schumpeter (2010), pp 27–28.

82 Compare Landes and Averitt (2007).

83 That is, unless policies and laws are deliberately calibrated to foster and protect ‘small companies, new entrants, innovators, disrupters and start ups’, as argued in Dahlsen (2016), p 13.

84 Billson (2014).

85 National Association of Retail Grocers of Australia (1999), p 10.

86 Council of Small Business Australia (2015), quoting Sue McCluskey, a member of the Competition Policy Review Panel. See also repeated use of this phrase in submissions to the Baird Committee Report (1999); National Farmers Federation (2014b); Victorian Farmers Federation (2014); Woolworths Limited (2014).

87 Formal definitions of ‘small business’ differ according to the purpose of the definition and the agency providing it. The Australian Securities and Investments Commission (‘ASIC’) defines a small business as one with annual revenue of less than $25 million, fewer than 50 employees, and less than $12.5 million of consolidated gross assets at the end of the financial year. The Australian Tax Office defines a small business as having an annual turnover of less than $2 million excluding GST. Fair Work Australia’s definition is less than 15 employees: ASIC, ‘Small Business – What is Small Business’, http://asic.gov.au/for-business/your-business/small-business/small-business-overview/small-business-what-is-small-business/. See generally Schaper and Volery (2007), p 82.

88 Billson (2015).

89 Schaper (2010), p 9.

90 Billson (2013).

91 AFGC (2014), p 4.

92 Billson (2013).

93 Batt (2015); Ball (2012). Others are more tempered in making such bold predictions, pointing out, amongst other things, the practical challenges facing Australia’s horticultural exporters: see eg ‘“Not Asia’s Food Bowl”: Joyce’, The Land, 4 August 2014, http://www.farmonline.com.au/news/agriculture/agribusiness/general-news/not-asias-food-bowl-joyce/2707437.aspx.

94 Mazzarol (2013).

95 Brett (2011), pp 44–45.

96 Kelly (1992), pp 19, 32.

97 Apart from competition and fair trading reform (see Part D below), recent government initiatives in support of small business has focused largely on various tax breaks and reducing red tape by streamlining reporting requirements: see eg Chamber of Commerce and Industry of Western Australia (2016). Further, in March 2016 the Office of the Australian Small Business and Family Enterprise Ombudsman was launched with the stated purposes of advocating for small businesses and family enterprises, providing access to dispute resolution services and ensuring that government policies take into account the needs of this sector: Australian Small Business and Family Enterprise Ombudsman, ‘About’, http://www.asbfeo.gov.au/about.

98 Further, when the recently elected Coalition Government removed the small business portfolio from the cabinet, it drew pointed criticism from the opposition and small business representatives: see eg ‘PM Resets Agenda with Reshuffle’, The Australian, 19 July 2016; David Lipson, Interview with Malcolm Turnbull, Prime Minister of Australia, and Peter Strong, CEO Cosboa, http://www.abc.net.au/lateline/content/2016/s4502972.htm, 18 July 2016.

99 Competition and Consumer Act 2010 (Cth) s 7(3).

100 ACCC (2014c), pp 104–106.

101 MGA is a national employer industry organisation representing independent grocers ranging in size from small to large. It has 2,500 members, who employ 115,000 staff with sales valued at $14 billion: MGA Independent Retailers (2015), p 4.

102 AFGC (2015), p 8.

103 See eg Cosboa (2014), pp 4–6.

104 Master Grocers Australia (2012), p 7.

105 The significance of the fact that advocates for change have seen it as necessary to couch their arguments in economic and competition terms is explored in Part E below.

106 Dahlsen (2016), p 4.

107 Brett (2011), pp 6–7.

108 Ozdowski (2012), p 27.

109 Ex parte H V McKay 2 Commonwealth Court of Conciliation and Arbitration 1 (8 November 1907) (Higgins J). The applicant sought a declaration that the wages in his factory were fair and reasonable. The court set out the test of what are fair and reasonable condition of remuneration of labour.

110 Cox (2014).

111 See eg ‘Fair Go Gone with Welfare Budget Cuts’, SBS News (online), 13 May 2014 http://www.sbs.com.au/news/article/2014/05/13/fair-go-gone-welfare-budget-cuts.

112 See eg Public Health Association of Australia, ‘This Weekend’s Message is Loud and Clear: Aussies Believe in a “Fair Go”’ (Media Release, 1 February 2015).

113 See eg David Zyngier, ‘The Great Equity Debate: A Fair Go for Australian Schools’, The Conversation (online), 29 May 2012, https://theconversation.com/the-great-equity-debate-a-fair-go-for-australian-schools-5609.

114 See eg Julian Burnside, ‘A Fair Go: How the Abbott Government Orchestrated a Clayton’s Withdrawal from the Refugees Convention’, The Monthly (online), 23 December 2014, https://www.themonthly.com.au/blog/julian-burnside/2014/23/2014/1419285187/fair-go.

115 Sekiya (2008), pp 21–32; The Lab Strategy, ‘Australia and Identity’, http://thelabstrategy.com/insights/australianness-and-identity.

116 Smith and West (2003), p 640.

117 From the mid-1990s, particularly under the Prime-Ministership of John Howard, it has been used to greatest effect by the Liberal party in proclaiming not just economic, but social and cultural policies presented as supporting ‘the mainstream’, and in that vein, eschewing political correctness or causes that are associated with minority interests: Dyrenfurth (2005), p 187. By shifting the focus from community to the individual, Howard undermined class identity to create a climate where individuals would ‘strive and achieve’: Milner (2009), p 157.

118 On Australia Day (26 January) 2011 Coles reduced the price of its private label milk from $2.41 for a two-litre container to $1 per litre. Woolworths, ALDI and others quickly followed suit, leading to an angry backlash from farmers – ‘the milk wars’. A Senate inquiry followed. The inquiry committee recommendations included that processors be required to provide greater clarity and transparency around pricing structures agreed with dairy farmers (Senate Economics References Committee (2011), para 5.43, 5.45), and that the government review the effectiveness of collective bargaining laws (para 8.9). Despite submissions to the contrary the committee did not find that specific conduct of Coles warranted legislative amendments (p xv). However the committee did recommend that the Government initiate an independent review of the competition provisions of the CCA (para 7.100). In 2016 the collapse of global milk prices led to renewed pressure on the local dairy industry and reinvigorated the milk debate. Dairy farmers launched protests and widespread media coverage ensued. While some continued to the blame on the MSCs, others have focused on the pricing practices of the dairy cooperatives (‘Murray Goulburn Dairy Farmers Wonder where it all Went Wrong’, The Australian, 14 May 2016; ‘Barnaby Joyce Calls for Justice and Transparency for Dairy Farmers in Murray Goulburn Talks’, The Sydney Morning Herald, 16 August 2016). At the time of writing the ACCC is investigating Murray Goulburn over allegations it misled investors about dairy sales and milk prices (‘ACCC Investigates Fonterra, Murray Goulburn for Dairy Price Cuts to Farmers’, The Australian Financial Review, 16 May 2016). Despite this, a vocal proportion of consumers continue to boycott MSC private label milk: see eg ‘Dairy Industry Faces a Perfect Storm’, The Age, 30 May 2016, p 12.

119 ‘Dairy Industry Faces a Perfect Storm’, The Age, 30 May 2016, p 1; Joyce (2016): announcing an ACCC inquiry into the dairy industry, promising investigation of the full range of structural and behavioural issues facing the industry.

120 Brett (2011), pp 39–40.

121 Ward (1966). However this thesis has come under criticism. As Tony Stephens has observed many modern-day Australians, who statistics show work longer hours and drink less than many people from other countries, would be puzzled by Ward’s characterisation: Stephens (2003), p 4.

122 Horne (2008), p 21.

123 Huntley (2015).

124 IPSOS Mackay (2008), pp 2, 15, 24; Catalyst Australia Inc (2010), p 4.

125 IPSOS Mackay (2008), p 28, found that consumers were aware of ‘anti-competitive and predatory behaviour’ with regard to farmers.

126 See eg The Australian Government the Treasury (2015), pp 22–24; Senate Economics References Committee (2010), pp 54–55; Hilmer et al (1993), p 163 (‘Hilmer Review’).

127 See eg Master Grocers Australia (2014), pp 57–58; Competition and Consumer Amendment (Misuse of Market Power) Bill 2014 (Cth) s 80AD, introduced by independent Senator Xenophon: Xenophon MP (2014), p 1016; Explanatory Memorandum, Competition and Consumer Amendment (Misuse of Market Power) Bill 2014 (Cth), pp 2–3 sch 1 item 1.

128 OECD Competition Committee (2007), pp 175–176 (especially the US contributions).

129 Competition and Consumer Act 2010 (Cth) s 81. However, the divestiture remedy in this context has rarely been used: compare Trade Practices Commission v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299 (Wilcox J).

130 Submissions in favour of introducing such a remedy have been rejected in at least three major reviews: Hilmer Review (1993), p 163; Dawson Report (2003), p 150; Harper Review (2015), p 347.

131 See eg Hilmer Review (1993), pp 163–165; Dawson Review (2003), p 60; Harper Review (2015), pp 346–347.

132 See Cooney Committee (1991), p 92; Hilmer Review (1993), p 164; Harper Review (2015), p 346.

133 See generally Dawson Report (2003), pp 66–67. See especially, Reducing Supermarket Dominance Bill 2013 (Cth) s 4(1), which seeks to make it an offence for a supermarket business to have a share of more than a set percentage.

134 See Harper Review (2015), p 322, citing Dawson Report (2003), pp 66–68; Productivity Commission (1999), p 286.

135 Dawson Report (2003), p 45. In Australia, notification is not compulsory; in practice, however, any proposed acquisition likely to raise a competition concern is voluntarily notified by the parties to the ACCC pursuant to an informal clearance regime: ACCC (2008), pp 8–9.

136 See Dawson Report (2003), p 67. This is illustrated by the acquisition of five supermarkets from family owned independent supermarket chain Supabarn by Coles, which was given approval by the ACCC in March 2016. The Koundouris family wanted to sell nine stores to Coles, however the parties agreed to reduce the number of stores to five after the ACCC expressed concerns that the proposed acquisition would be likely to substantially lessen competition: ACCC (2016b).

137 Department of Treasury (2014), p 34. See Produce and Grocery Industry Code Administration Committee (2007), cl 8.1.

138 ACCC (2008), p 427. Following the 2008 inquiry the ACCC did secure voluntary agreement from at least Coles and Aldi that they would automatically notify any acquisition. However, this practice is no longer being followed, at least by Coles. Statistics supplied to the authors by the ACCC show that the number of pre-assessed and informally reviewed supermarket acquisitions has generally risen over time, from two in 2007 up to 89 in 2014, dropping to 53 in 2015. However, there was only one expression of concern, and one acquisition opposed, under the confidential informal review process during this time. Pursuant to public informal reviews there were only three supermarket acquisitions opposed (this from a total of 234 pre-assessments between 2006 and 2015).

139 Baird Committee Report (1999); Senate Economics References Committee (2004).

140 Dawson Report (2003), pp 67, 69–70.

141 ACCC (2008).

142 Treasury (2008).

143 Competition and Consumer Legislation Amendment Bill 2011 (Cth).

144 In the 2015 inquiry (Harper Review (2015); Commonwealth of Australia (2014)), various organisations made submissions to the effect that creeping acquisitions remain a problem: see eg National Roads and Motorists Association (2014), p 3; Cosboa (2014), p 3; Metcash (2014), p 3; Australian United Retailers Limited (2014b), p 17.

145 Harper Review (2015) p 323. The Law Council of Australia’s submission in response to the issues article supported this position: Law Council of Australia (2014b), pp 72–74.

146 This has been described as ‘one of the enduring controversies of competition policy in Australia’: Harper Review (2015), p 355.

147 Competition and Consumer Act 2010 (Cth) s 46(1).

148 Evans et al (1984).

149 The following are a sample of the submissions to the Harper (2014) Review Draft Report that strongly supported changes to s 46 to increase its focus on ‘purpose’: Australian Chamber of Commerce and Industry (2014), p 16; ACCC (2014b), pp 48–54; Australian Dairy Farmers (2014), pp 5–7; AFGC (2014), pp 7–8; Australian Retailers Association (2014). pp 5–6; Australian United Retailers Limited (2014a), pp 9–11; Business SA (2014), p 11; Chamber of Commerce and Industry Queensland (2014), pp 4–5; CHOICE (2014), pp 26–27; Growcom (2014), p 2; National Farmers Federation (2014a), pp 10–12; Retail Guild (2014), p 19; Small Business Development Corporation (2014), pp 7–9; The Australian Chamber of Fruit and Vegetable Industries (2014), pp 3–5.

150 Fels (2016), p 11; ‘Effects Test May Threaten $2b Investment’, Australian Financial Review, 2 March 2016, p 10.

151 The form of the proposed test was that: ‘A corporation that has a substantial degree of power in a market shall not engage in conduct if the conduct has the purpose, or would have or be likely to have the effect, of substantially lessening competition in that or any other market’: Harper Review (2015), pp 513–515.

152 ‘Goyder Joins War over ACCC Powers’, The Australian Financial Review, 13 January 2016, p 7; ‘Sims Accuses Coles Boss of Effects Test Fibs’, Australian Financial Review, 29 March 2016, p 5.

153 For an account of this, see Fels (2016), pp 19–21.

154 Morrison et al (2016). On 5 September 2016 Treasury released for consultation an exposure draft bill based on the recommendations made by the Harper Review (2015): Exposure Draft, Competition and Consumer Amendment (Competition Policy Review) Bill 2016 (Cth). The period in which stakeholders could make submissions ended on 28 October 2016: Consultation Hub, Competition Law Amendments: Exposure Draft Consultation, https://consult.treasury.gov.au/market-and-competition-policy-division/ed_competition_law_amendments, 5 September 2016.

155 The 2015 review panel was explicit on this point: Harper Review (2015), p 307; and it has been repeatedly emphasised in statements by the ACCC Chairman: Sims (2014).

156 Fels and Grimwade (2003), p 10.

157 See generally Nagarajan (2013).

158 See eg the table of public benefits recognised by the ACCC in Nagarajan (2013), p 143.

159 Competition and Consumer Act 2010 (Cth) s 93. This notification process has been available since 2007 and is available where the value of the transactions that the collective bargaining group will conduct with the target under the arrangement in any 12 month period will not exceed $3 million. For the primary production sector, that threshold is $5 million. The process is described in ACCC (2011). Prior to 2007, collective bargaining exemptions could only be obtained through the more onerous, expensive and lengthy process of authorisation which is available also for most other types of anti-competitive conduct under the Competition and Consumer Act 2010 (Cth). In 2003 an independent review recommended that the speedier and simpler process of notification be extended to collective bargaining by small business in response to criticisms regarding the burden of the authorisation process: Dawson Report (2003), chapter 7. See n 199 below for details on changes to the provisions relating to collective bargaining in Exposure Draft, Competition and Consumer Amendment (Competition Policy Review) Bill 2016 (Cth). Aimed at simplifying the various authorisation provisions the Bill does not recommend changes to the thresholds for transactions to be captured under the collective bargaining provisions.

160 ACCC (2002a), p 110.

161 Fels and Grimwade (2003), p 21.

162 ACCC (2002a), pp 123–124.

163 ACCC (2011), p 35.

164 See eg determinations allowing or proposing to allow collective bargaining in the chicken growing and dairy industries: ACCC (1998); ACCC (2001) – set aside by the Full Federal Court in Jones v ACCC (2003) 131 FCR 216 (Wilcox, Cooper and Allsop JJ); ACCC (2002b) – replaced by a subsequent tribunal determination: Application by National Foods Ltd, Re (2002) ATPR 41–885, at pp 45, 131.

165 ACCC (2011), p 35.

166 Reforms to simplify the exemption process were introduced in 2006 following a 2003 review: Dawson Report (2003), chapter 7; Trade Practices Legislation Amendment Act (No 1) 2006 (Cth) sch 3; and further reforms are proposed following the 2015 inquiry: Harper Review (2015), p 402, recommendation 54. These reforms are largely directed at attempting to increase and widen the use of collective bargaining notifications by making the process more flexible and accessible to small business and also by overcoming the apparent perception that the ACCC will not approve arrangements that include boycott activity. In line with this the Exposure Draft, Competition and Consumer Amendment (Competition Policy Review) Bill 2016 (Cth) proposes amendments that would simplify the various authorisation provisions into a single authorisation provision and would permit the ACCC to authorise conduct that would otherwise be prohibited: Explanatory Materials, Exposure Draft, Competition and Consumer Amendment (Competition Policy Review) Bill 2016 (Cth) para 10.16. It would be the ACCC, not the tribunal, which would be the decision-maker in the first instance with regard to the granting of general merger authorisations (Explanatory Materials, Exposure Draft, Competition and Consumer Amendment (Competition Policy Review) Bill 2016 (Cth) para 10.17 (‘EDB’)). The ACCC would have the power to impose conditions on notifications including collective boycott activity and would be able to require such conduct to cease through a stop notice power: EDB s 93AG.

167 ACCC (2011), p 35.

168 Compare the recommendation of the 2015 inquiry that the Competition and Consumer Act 2010 (Cth) be amended to allow the ACCC to grant block exemptions in respect of categories of conduct on the grounds that the conduct is unlikely to substantially lessen competition or is likely to result in a net public benefit: Harper Review (2015), pp 403–405, recommendation 39. The EDB endorses this recommendation, proposing that ‘Division 3 – Class exemptions’, be repealed in favour of the proposed s 95AA that would allow the ACCC to exempt conduct or categories of conduct that it determined would not or were unlikely to raise competition concerns or that were likely to increase net public benefits. This recommendation is influenced by the use of block exemptions in the US and the EU. In the EU there is also provision for excluding agreements that do not substantially lessen competition from the competition rules: see European Commission (2014a).

169 This is in contrast to the approach taken in other jurisdictions. For example, in the US: see eg Small Business Investment Act of 1958, Pub L No 85–699 (2013) (albeit this appears to provide limited immunity – for joint research and development activity only); Associations of Agricultural Products Producers Act, 7 USC §§ 291–2 (‘Capper-Volstead Act’). In relation to the Capper-Volstead Act, see Varney (2010).

170 The removal of what is seen as an unnecessary regulatory burden in the grocery sector is projected as generating $200 million in cost savings: see Deloitte Access Economics (2013), pp 8–10. This is consistent with a KPMG report published at around the same time, which found the sector was being unduly constrained by the level of government regulation imposed: KPMG (2014), p 18.

171 Harper Review (2015), pp 44–45; Productivity Commission (2014), p 28; Productivity Commission (2012), pp 161–162. See also SGS Economics and Planning (2010).

172 Harper Review (2015), pp 46–47; Productivity Commission (2014), p 27; Productivity Commission (2011), pp 275–312.

173 Harper Review (2015), pp 145–147.

174 Harper Review (2015), p 131.

175 In the 2015 inquiry small retailers described trading hours as a ‘weapon’ that could be used by those with market power. However, this concern was given short shrift, the review panel concluding that ‘the relevant policy question is whether the restrictions are in the public interest, not whether they are in the interests of potential competitors’: Harper Review (2015) pp 160–162.

176 Aldi Stores (2014); SGS Economics and Planning (2010), p 27.

177 Competition and Consumer Act 2010 (Cth) s 21 (formerly s 51AC).

178 Competition and Consumer Act 2010 (Cth) s 23.

179 Commonwealth, Parliamentary Debates, House of Representatives, 30 September 1997a (Peter Reith, Minister for Workplace Relations and Small Business), p. 8765.

180 Reith (1997c); reproduced in Commonwealth, Parliamentary Debates, House of Representatives, 30 September 1997b (Peter Reith, Minister for Workplace Relations and Small Business), pp 8765–8771, see especially pp 8768–8770. This ministerial statement was the federal government’s response to the House of Representatives Standing Committee on Industry, Science and Technology (1997).

181 Competition and Consumer Act 2010 (Cth) s 21(4)(a).

182 Competition and Consumer Act 2010 (Cth) s 21(4)(c).

183 Competition and Consumer Act 2010 (Cth) s 22.

184 Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132, at p 140 para 33 (Tamberlin, Finn and Conti JJ).

185 A-G (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557, at pp 583–584 paras 119–122 (Spigelman CJ).

186 Hurley v McDonalds Aust Ltd (1999) ASAL 55–041, at p 7 para 22 (Heerey, Drummond and Emmett JJ).

187 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 (15 August 2013) at para 41 (Allsop CJ, Jacobson and Gordon JJ). For discussion of these developments, see generally McLeod (2015).

188 ACCC (2014a).

189 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (22 December 2014) at para 1 (Gordon J).

190 ACCC (2015).

191 Penalties are currently set at maxima of $1.1 million for companies and $220 000 for individuals. An increase in the corporate maximum to the greater of: a maximum penalty of $10 million, three times the value of the benefit the company received from the breach or 10 per cent of annual turnover in the preceding 12 months if the benefit cannot be determined, in line with the maximum penalties applicable to breackes of the competition rules, has been supported in the Final Reports of two subsequent reviews: Consumer Affairs Australia and New Zealand, Australian Consumer Law Review Final Report (2017), p 87, Productivity Commission, Consumer Law and Enforcement Research Report (2017), p 5.

192 See eg 10 Million Penalties’ (Media Release, MR 320/14, 22 December 2014a). ACCC (2014a).

193 ACCC v Woolworths Limited [2016] FCA 1472.

194 ACCC, ‘Woolworths “Mind the Gap” scheme not unconscionable’, Media Release (8 December 2016). In the press the ACCC Chairman was quoted as saying:

We took on this case because we were concerned that seeking money from suppliers to fill profit gaps went beyond normal commercial hard bargaining, and we were concerned that if you were a small business and subject to arbitrary demands that it is hard to make future investment decisions and otherwise run your business … . My view is that [that] is an unfortunate way to do business, but we accept the court has made a ruling. It is not the sort of business behaviour I am used to, having spent 20 years in the private sector.

See ‘Woolworths beats ACCC supplier mistreatment case’, The Australian, 8 December 2016.

195 Competition and Consumer Act 2010 (Cth) s 27.

196 Competition and Consumer Act 2010 (Cth) s 24(1). In order for the term to be unfair, it must satisfy all three criteria.

197 Billson (2015): ‘[a]nd we are nurturing a fairer, more healthy, competitive environment where efficient businesses business [sic] and small can thrive and prosper’.

198 Consumer Affairs Australia and New Zealand (2014). See also Explanatory Memorandum, Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 (Cth) at pp 7–8 para 1.2–1.7, p 24 para 3.7.

199 Notably, in several parliamentary speeches the value of a ‘fair go’ for small business was invoked in support of the unfair contract terms amendment. See eg Van Manen (2015), p 8435; Scullion (2015), p 5608.

200 Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015 (Cth).

201 Competition and Consumer Act 2010 (Cth) s 51AE(1)(b). Industry codes prescribed under the Act may be mandatory or voluntary. A voluntary code must specify the method by which a corporation agrees to be bound by the code and how it will cease to be bound: s 51AE(1)(c). However, for the purposes of the code, once a person has agreed to be bound by a voluntary code, they are lawfully bound to the prescribed provisions of that code until they have ceased to be bound by it: s 51ACA(2).

202 ACCC, ‘Food and Grocery Code of Conduct’, https://www.accc.gov.au/business/industry-codes/food-and-grocery-code-of-conduct.

203 See Department for Business, Innovation & Skills and Groceries Code Adjudicator (2009).

204 Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015 (Cth) at clause 2.

205 Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015 (Cth) at clauses 7, 8.

206 Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015 (Cth) at clauses 9, 10, 13–18.

207 Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015 (Cth) at clauses 31–38.

208 Department of Treasury (2014), p 1. The NFF, having been involved in early discussions, withdrew their support for the code when it became clear that the other parties would not support their push for a mandatory code: National Farmers Federation (2015).

209 In February 2000, in response to a recommendation by the Joint Select Committee on the Retailing Sector (1999) in its report Fair Market or Market Failure?, an industry committee was established to develop a voluntary industry code of conduct with an Ombudsman service to assist in resolving disputes in the retail grocery industry: Produce and Grocery Industry Ombudsman, ‘History of the Code’, http://www.produceandgrocerycode.com.au/historyofcode.htm. The Produce and Grocery Industry Code of Conduct (PGIC) was a voluntary, industry-run code administered by committee. The PGIC committee ceased meeting in 2011: Fels and Lees (2015), p 23.

210 See eg Coles, ‘Coles Supplier Charter’, https://www.supplierportal.coles.com.au/csp/wps/portal/web/ColesSupplierCharter; Coles, ‘Coles Supplier Awards’, https://www.coles.com.au/supplierawards, 2016; Woolworths Limited (2016); Woolworths, ‘Supplier Excellence Program’, https://www.wowlink.com.au/wps/portal.

211 See Department of Treasury (2014), p 1; Billson, ‘Government Welcomes Industry Led Protection for Suppliers’, http://www.brucebillson.com.au/2013/11/18/government-welcomes-industry-led-protection-for-suppliers/, 18 November 2013.

212 Clear examples of this can be seen in several submissions made to Treasury in response to the ‘Improving Commercial Relationships in the Food and Grocery Sector’ Consultation Paper: see eg Victorian Farmers Federation (2014), p 1, recommending that the grocery code be mandatory, and that the Federal Government appoint an Ombudsman as soon as possible; Law Council of Australia (2014a), pp 1, 6, supporting the prescribing of a mandatory Grocery Code stating that pecuniary penalties available for a contravention of the Grocery Code must be substantially higher than those that were currently available under the already established Franchising Code.

213 Hughes (2012).

214 Kolk and van Tulder (2005).

215 See eg Lange and Haines (2015), chapter 1.

216 Consistent with the hegemony of neo-liberalism across the developed world, and despite growing concerns over the consequences of neoliberal policies for agri-food systems, the environment, food producers and society generally. See generally Conway and Heynen (2006), p 17; Heynen et al (2007); Rosin et al (2012).

217 See similarly Leigh and Triggs (2017).

218 See Habermas (1989), p 266.

Additional information

Funding

The research relevant to this article has been conducted for a project funded by the Australian Research Council and based at the University of Melbourne with collaborators, David Merrett, Jane Dixon and Christopher Arup, all of whom contributed in various ways to the data collection and analysis in this article.