Thursday, April 25, 2024

Greens targets supermarkets with divestiture legislation

The Australian Greens will introduce a bill to parliament that would grant divestiture powers to target Australia’s supermarket duopoly.

Commenting on the legislation, Greens Economic Justice spokesperson Senator Nick McKim says the giant supermarket corporations have had it their way for far too long.

“It’s time that the interests of people took precedence over the profits of corporations,” he says.

“We need to stop supermarket corporations ruthlessly using their market power to gouge prices while raking in billions of dollars in profits.

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

Mr McKim believes the legislation isn’t a “controversial or radical proposition”.

“The UK has this power, and the US has been using it for well over a century,” he says.

“The competition agencies of Ireland, Italy and the Netherlands have all recently required the divestment of supermarket assets in order to increase local competition.”

Rejected by ARA

The Australian Retailers Association (ARA), however, believes the proposed bill is a “poorly conceived” idea that could escalate grocery prices for consumers.

According to ARA CEO Paul Zahra, the “rushed piece of legislation gives little consideration to the true ramifications on consumers and the retail sector”.

“Large supermarkets operate with high fixed costs and intricate supply chains. The most likely outcome of any forced divestment would be to disrupt the economies of scale retailers have painstakingly built,” he says.

Mr Zahra says Australian business is not directly comparable to other regions due to its large geographic size – coupled with a relatively small population – which makes achieving economies of scale an ongoing challenge.

“The ARA supports initiatives aimed at enhancing market competition, but divestiture is not a workable proposition for a market the size of Australia and may have unintended consequences for Australian consumers,” he says.

“We recognise the current political focus is to single out supermarkets during a cost-of-living crunch. However, if we applied this divestiture logic to business sectors outside of supermarkets, this would set a dangerous precedent in Australia.

“The Productivity Commission in its submission to last year’s inquiry into promoting economic dynamism, competition and business formation said our supermarkets were ‘highly competitive’.”

Beyond supermarkets  

Mr McKim says the bill isn’t just about supermarkets.

“Australia has competition issues in many sectors of the economy,” he says.

“RBA Governor Michelle Bullock agrees that some corporations 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.

“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.”

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