Retail power abusing farmers but govt reluctant to break up stores

Andrew Leigh, the Assistant Treasurer and Assistant Minister for Competition, conceded he was worried by recent decades of concentration by a few market players within the $133 billion grocery sector.

The National Farmers Federation calculated Australia's four largest food retailers now corner about 82 per cent of the food and grocery market - significantly more clout than the top four performers in most other business sectors.

Coles and Woolworths dominated with a combined 65pc of sales.

"As it currently stands Australia's competition law has been ineffective at preventing the misuse or abuse of market concentration," the NFF said in its submission to the senate inquiry into supermarket pricing.

However, despite clear evidence that market concentration had gone up and price markups had increased, Dr Leigh told ABC RN that forcing retailers to sell stores to their competitors was "not a priority" the government was focusing on at the moment.

He also wanted to wait for the findings of a separate government review into price gouging by supermarkets before committing on widespread calls for the Food and Grocery Code of Conduct to be made mandatory and regulated by an authority outside the industry.

The NFF said existing structures and tools in place had actually allowed the development of "a concerning level of market concentration and the misuse of market power to the detriment of Australian farmers and farm businesses".

Market concentration could be used to manipulate pricing and exploit the lack of market price transparency in the agricultural supply chain.

Nationals leader David Littleproud has pushed hard for the government to introduce powers so "if they do the wrong thing" the biggest supermarkets could be forced to divest stores to rival retailers, thereby increasing the number of competitors in the industry.

Mr Littleproud said Dr Leigh's belief such big stick legislation was only needed on rare occasions did not wash.

"That's what penalties and punitive penalties are all about, to be a deterrent," he said.

If the government was not game to put in a deterrent "the corporates will go back to what they're doing", with no transparency from the farmgate about what they were paying for the food they sold.

Farmers were not seeking fixed prices, they wanted fair, transparent prices.

"Everyone just wants to have fair, transparent prices," he said.

When the evidence was clear that meat prices or fresh produce prices were being abused by market power, legislators had to live up to their responsibilities.

NFF's submission to the senate inquiry said it was the farm body's view that the big retailers used their market power to the detriment of farmers through lower prices, unfair risk burden and longer term uncertainty, which placed significant pressure on individual farm businesses

"Market concentration is open to abuse by firms which hold significant market power along the supply chain," the NFF said.

"While food and fibre production is one of the least concentrated sectors in Australia, supermarkets are one of the most concentrated.

"The agricultural supply chain's uneven distribution of market concentration threatens the economic conditions essential for dynamic productive and profitable farms."

The farmer body noted how retail butchers sold just 19pc of domestic fresh meat, compared to supermarkets having 81pc market share.

Almost 60pc of drinking milk was sold by supermarkets, just over half of which was marketed under the retailers' own private labels.

Coles and Woolworths sold about half of all fruit and vegetables in Australia.

While the NFF appreciated the strong competitive nature of supermarket shelf price competition benefited consumers, this competition was at the expense of payments to farmers.

It said competition laws and regulations including the Food and Grocery Code of Conduct must be fit for purpose and provide clear direction on supply chain behaviour and penalties for any breaches.

Market power abuse occurred because of a consumer-centric focus provided minimal protection from unfair supply chain behaviour and unconscionable conduct provisions were so narrowly defined they were of little use to small to medium sized businesses, such as farmers.