Heavy fines proposed for anti-competitive supermarket practices

(Source: Bigstock)

Treasurer Jim Chalmers expressed support for the independent review of the Food and Grocery Code of Conduct, proposing a mandatory code which – if adopted – will result in multi-million dollar penalties for supermarkets and suppliers who engage in anticompetitive practices.

The review proposes a mandatory code, enabling the Australian Competition and Consumer Commission to take supermarkets to court and seek penalties of up to $10 million, three times the value of the benefit from the breach, or 10 per cent of the company’s annual turnover – whichever is the greatest.

The mandatory code should apply to all large supermarkets with an annual revenue threshold of $5 billion, indexed for inflation.

However, the independent review by economist Craig Emerson opposes a Green Party idea to introduce divestiture powers into Australian competition law to break up the two major supermarket chains.

“If forced divestiture resulted in a supermarket selling some of its stores to another large incumbent supermarket chain, the result could easily be greater market concentration,” the review said.

The review explained that if large incumbent supermarket chains were restricted from acquiring the divested stores, this would leave only smaller supermarket chains and foreign supermarkets as potential buyers.

“Further, if these smaller chains were not interested, or were not in a position to buy, these stores would be forced to close. This would be at the cost of the jobs of the workers in those stores and of inconvenience to local shoppers who would need to go elsewhere to buy their groceries,” according to the review.

The review said the threat of divestiture would need to be credible to be an effective deterrent to anti-competitive behaviour by supermarkets.

The review clarified that the existing voluntary code contains many useful provisions that could be imported into the mandatory code.

Chalmers said that the review’s proposal will help address the cost-of-living crisis and benefit households and farmers.

“This is all about a fair go for farmers and families. That’s what this is all about. It recognises that by replacing a voluntary code with a mandatory code, it’s easier to enforce. We can impose penalties on people who do the wrong thing and it’s also harder for people to walk away from,” Chalmers said.

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