Watchdog would get powers to ‘smash’ supermarket duopoly under Greens bill | Business

Australia’s competition regulator would gain powers to “smash the supermarket duopoly” and force the breakup of big supermarket chains, under a push from the Greens to be introduced to federal parliament.

The Greens will this week table a private senator’s bill seeking to introduce divestiture powers into Australian competition law. The party’s economic justice spokesperson, Nick McKim, said they will seek support across the parliament for their plan which would allow the Australian Competition and Consumer Commission to apply for a court order requiring large companies to divest assets if their market power is unfairly inflating prices or blocking competition.

The Greens say their push echoes similar long-established schemes in the United States and United Kingdom. Former ACCC chair Allan Fels says a divestiture power should be “part of the toolkit for all competition laws everywhere in the world”, but conceded it may not assist in supermarket issues specifically.

While the proposed powers would apply to all large businesses, the minor party says its push is squarely aimed at addressing issues around the major supermarkets. The Greens suggested the proposed powers could be used to require the sale of specific Coles or Woolworths-owned supermarkets or liquor outlets, or its supermarket home brand product lines, to a local or international competitor.

As political focus in Australia’s cost-of-living crisis has shifted to the market power of supermarkets, several politicians have raised discussions about potential divestment reforms. Crossbench MPs Bob Katter and Andrew Wilkie proposed forced divestiture of Coles and Woolworths last month, promoted with a media stunt where the two donned inflatable pig costumes.

At the time, assistant minister for competition, Andrew Leigh, told Sky News “we’re not looking at divestment powers … They’re not one of the major tools you use for getting better prices for consumers.”

Leigh instead raised the government’s work around merger reform and investigations into the supermarkets.

Fels, the former ACCC chair from 1995 to 2003, called for divestiture powers in a report commissioned by the Australian Council of Trade Unions last month.

“Australia should also introduce a divestiture law which allows big business to be broken up in circumstances where a court has found that it has breached a competition law seriously and where a court determines that divestiture is the best remedy,” Fels wrote.

Fels told Guardian Australia divestiture powers should be a “core economic principle”, available across the whole economy, claiming it would better compel good corporate behaviour than the threat of fines.

But while believing there would be “considerable” long-term benefits of such a power economy-wide, Fels said he didn’t expect such laws would force any major changes to supermarkets specifically.

“I don’t envisage the law to break them [supermarkets] up in any major way, only at the margins,” he said.

McKim’s office pointed to recent statements about lack of competition from Reserve Bank governor Michelle Bullock and current ACCC chair Gina Cass-Gottlieb.

In response to questions from McKim at a Senate estimates hearing in February, Bullock said: “I think that, yes, there probably are firms that are using the circumstances of lack of competition, strong demand and, as you mentioned, the cover of higher inflation.”

In a May 2023 estimates hearing, McKim asked Cass-Gottlieb if the market power of the big supermarkets made it easier for them to raise prices.

“Consistent with the capacity of concentrated sectors to have higher mark-ups, there is a capacity to do so,” she said.

In the same hearing, Cass-Gottlieb nominated reforms to company mergers as another important consideration, but that divestiture powers would create stronger competition.

McKim claimed the major supermarkets “have had it their way for far too long”.

“It’s time that the interests of people took precedence over the profits of corporations. We need to stop supermarket corporations ruthlessly using their market power to gouge prices while raking in billions of dollars in profits,” he said.

“Giving our courts and competition regulators the power to smash the supermarket duopoly will help rein them in.”

McKim raised about competition problems “in many sectors of the economy”, which he said the proposal would also be able to address.

“The very existence of divestiture powers will mean that dominant supermarkets, banks or energy companies will think twice about pocketing higher margins and instead pass on savings to their customers.”