Sell off supermarket chains to stop high prices, says Australian coalition

04 Jul 2024 --- Supermarket chains could be broken up to stop the leading players from abusing their market share powers, in new proposals unveiled by the coalition opposition party in Australia. The plans have been labeled a “shambles” by the incumbent government.

Peter Dutton, federal opposition leader, has announced plans to create “divestiture powers” to end what the Coalition calls a supermarket duopoly. It says the dominance of the main two supermarkets in the country has led to rising consumer costs and an unfair deal for farmers.

“We know that internationally there are examples of divestiture, which means that where there’s an abuse of market share or that power, then there’s a consequence to pay for that — and we have taken a decision as a Coalition to support a regime that allows for divestiture,” says Dutton, who announced the proposals alongside Nationals leader David Littleproud and shadow treasurer Angus Taylor at a press conference in Canberra.

An end to the duopoly
The big two supermarkets in Australia, Coles and Woolworths, are estimated to have up to 82% of the market share. In comparison, the UK’s two biggest supermarkets, Tesco and Sainsbury’s, hold around 43% of the market.

The Coalition wants to tackle this power imbalance in the market so customers and suppliers are not negatively impacted financially.

A government-commissioned review into harmful practices in the food and grocery industry was published last month. Led by economist Craig Emerson, one of its recommendations is to introduce fines for breaches by supermarkets of up to US$6.7m or 10% of turnover in the preceding 12 months, something Australia’s incumbent Labor government has promised to legislate.

According to the Coalition, the Emerson review measures are a good start but don’t go far enough. It says the government has been “weak” on supermarkets and wants to “institute a supermarket commissioner” to penalize supermarkets that use their power unjustly.

Power to the Commission
“This is about giving them [the Australian Competition and Consumer Commission] the tools to change the culture, about making sure that we have an agile system that allows the ACCC to move quickly, to give infringement notices,” says Littleproud.

He continues that this should be determined by a court of law and not by politicians.

“That is a fair way to make sure that the regulatory guardrails are there to ensure there is fairness from the farm gate to your plate,” he adds.

A section of the Emerson review highlights some suppliers’ fears of retribution from the supermarkets if they complain about prices and practices, something the Coalition also addresses in its plans.

It wants the proposed supermarket commissioner to conciliate openly with farmers and supermarkets on this issue. Where farmers feel they are treated unfairly, the commissioner “can lift that and accelerate that through to the ACCC for further investigation.”

A “shambles”
Treasurer Jim Chalmers calls the Coalition’s plans a “shambles” and says they lack detail. “One of the reasons why the last three big reviews of competition policy and the last review of the grocery code quite recently were reluctant to go down this path is because of the possible unintended consequences,” he says in an interview with Sky News Australia.

“Forcing supermarkets to sell? I mean, do they sell to another big rival? Does it mean the closure of stores? Does it mean less choice and therefore, less competition in local communities? These are the sorts of details they aren’t able to provide. That’s what makes them a risky and dicey proposition, particularly on the economy.”

Cost of living issues are top of the agenda for all parties in the country ahead of the next General Election, currently scheduled for May 2025. Dutton says the Coalition will have more to say on the divestiture plans in the coming weeks.

By Sade Laja

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