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Big Problems in Breaking Majors

Business groups say the Greens’ plan to break up major supermarket chains found to be abusing their market power would have a “chilling effect” on the economy. Under a new Bill to be introduced by the Greens on Wednesday, Australia’s consumer watchdog would have the power to ask the courts to split up supermarket giants and crack down on duopolies. The divestiture legislation would allow the Australian Consumer and Competition Commission to break up powerful corporations and if passed, the likes of Coles and Woolworths could be forced to divest assets that are “misusing their market power to inflate prices, exploit their supply chains, or keep out the competition”.

But the Business Council of Australia said the Bill could potentially have serious unintended consequences that could result in consumers “paying more, rather than less”. BCA chief executive Bran Black pointed to the last three major competition reviews, conducted between 1993 and 2015, all considered divestiture. But they stopped short of recommending it, warning of the “negative flow-on effects”. “Given this Bill’s economy-wide reach, it could have a chilling effect on business investment and jobs across Australia, at a time when we need to focus on growth and productivity,” he said. “Policies should not be rushed, particularly if they could negatively impact consumers and the unintended consequences risk business investment and growth. “This Bill puts the cart before the horse given the nine supermarket inquiries underway. “We should let those inquiries run their course and then discuss any policy changes and consult on them properly so consumers benefit and jobs are protected.” Former ACCC chair Allan Fels, referring to the success of similar laws in the US, said divestiture powers had “always” been missing from Australia’s competition law. “It’s been missing not for reasons of economic logic – the economic logic is extremely strong,” Professor Fels said. “It’s been missing because there hasn’t been a political willpower of governance to do it, in the face of big business opposition.” He said the time was right “now” to change the rules. “There’s been a step up in the degree of concentration in the Australian economy … Concentration is increasing and the amount of competition is declining,” he said.

The Nationals have flagged they could support the Greens’ Bill, with leader David Littleproud saying the laws would act as a powerful deterrent to force supermarket chains to do the right thing. “I think we’ve gotten to a juncture now where protections need to be given to farmers and to consumers,” he told reporters. “We want to work to make sure we get the architecture right and if we don’t get it right we miss out on the opportunity to get that protection.” While supporting most of the Greens proposal, Mr Littleproud said he wanted to see a grocery code of conduct made mandatory for grocery retailers and tighter regulations focusing on supermarket power. “There are some real, granular issues that need to be addressed with supermarket power and market dominance,” he said. ( 19/03/24)

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