Andrew Leigh

E&OE
RADIO INTERVIEW
2CC CANBERRA WITH STEPHEN CENATIEMPO

TUESDAY, 16 APRIL 2024

SUBJECTS: Recent stabbing attacks in Sydney, Food and Grocery Code of Conduct, merger reform, divestiture powers, competition and productivity.

STEPHEN CENATIEMPO (HOST): This morning joining us to talk all things federal politics is the Assistant Minister for Competition, Charities and Treasury, and the Member for Fenner, Andrew Leigh. Andrew, have we become unrecognizable as a country?

ANDREW LEIGH: It’s certainly two shocking tragedies, isn't it Stephen. And my heart goes out to the victims of the Bondi Junction and Wakeley incidents. I mean they're really both shocking. And, you know, in the case of the Bondi Junction one, I suppose I only take solace from the fact that there were so many ordinary Australians who ran towards danger. The bloke with the bollard, the heroic police officer who ultimately shot the offender dead, the many people who stepped in and acted as first responders, surely saving lives in the process. So you saw some of the worst of Australia and some of the best in that incident.

CENATIEMPO: The difference between the two incidences, we’re led to believe that there were mental health issues with the stabbings in Bondi Junction. Given that there were obviously communication issues between Queensland and New South Wales, we’re led to believe that this bloke was from Queensland and had moved to New South Wales, do we need to take a Federal approach to the way we handle mental health and reporting of these kinds of things. Because we seem to see too many things fall through the cracks between, and I know we're a federation, but you'd like to think that it was a bit more cohesion.

LEIGH: Yeah, I mean there will certainly be full inquiries, and which will go to issues such as the one you've raised Stephen. I know there's considerable engagement between the New South Wales Police, who have the chief responsibility, and also the Australian Federal Police. But I'm sure questions such as management of mental health cases, will be part of how the Minns government looks into the inquiry.

CENATIEMPO: Now, competition is one of your portfolio responsibilities. We've been talking quite a bit about that in recent times, particularly with the supermarkets. The Food and Grocery code of conduct, last week we had the interim report handed down. So explain to us what we're going to do here to try and create more competition in the grocery, Food and Grocery sector.

LEIGH: Right now, Stephen, there's a voluntary code which governs relationships between the supermarkets and their suppliers. That means that it's a code without teeth, which can't be enforced by the competition watchdog. The proposal from Craig Emerson, who’s the independent reviewer, is that it be made mandatory. And that would be the most significant change to the code since the Coalition put a voluntary code in place in 2015. It then means that we've got better checks and balances on how the supermarkets engage with suppliers, and that reflects their considerable market power. Australia's supermarket sector is one of the most concentrated in the world. We want to make sure that farmers and shoppers get a fair deal.

CENATIEMPO: So, when you talk about having teeth, and you're effectively talking punishment, what sort of penalties can be handed down here? Because the reality is that the major supermarkets are already signed up to this code of practice. Now, as you say, it's voluntary, I understand that, but is the code of practice in and of itself going to change?

LEIGH: Craig Emerson is also looking at those questions. But you asked about penalties directly there, Stephen, if you brought it straight into the Competition Act, then the penalties there are threefold: the greater of $10 million, 10% of turnover, or three times the ill-gotten gains. Now, if you're talking about companies which have more than $50 billion turnover annually, you're talking about potentially serious penalties. Craig Emerson's final report will look at precisely how those penalties might apply.

CENATIEMPO: The other thing I want to talk about, and you and I disagree on this point, that I think we do need to have the option of divestiture powers, like other similar economies do as a, as a deterrent to monopolies or duopolies is in this case. But you've talked, there are also going to be changes to the mergers and acquisitions capabilities of these supermarkets, how will that actually work?

LEIGH: Well, mergers laws are the most important part of curbing excessive market concentration, Stephen, and our merger system just isn't fit for purpose. There's three different pathways that you can go through if you're looking at merging, and we don't require compulsory notification to the competition watchdog. And that's pretty unusual. Most other countries – United States, Canada, Japan, the European Union – require merging parties to notify the competition watchdog. But you don't have to in Australia, which means that the competition watchdog here doesn't see three out of four mergers, and you can't block what you can't see. So our proposed reforms would have a single administrative pathway, more transparent, quicker, simpler, more efficient, and allows the competition watchdog to put its energies on assessing the mergers that really matter.

CENATIEMPO: My only difficulty with this is that who is there left to merge?

LEIGH: There's always mergers going on in the economy and you've …

CENATIEMPO: I’m talking specifically in the Food and Grocery sector.

LEIGH: No, that's right. I mean, that's a sector which has aggregated through mergers under different merger laws than we have now. Coles and Woolworths started off about 20% market share between them back in the 1950s, and a series of mergers saw them grow to their current scale. You can't unscramble the egg. But what we're arguing for is a set of merger laws that would bring Australia up to international best practice, which would ensure that the competition watchdog is able to bring data to bear in a way that it just never has before.

CENATIEMPO: But you can unscramble the egg with divestiture powers.

LEIGH: These powers are very rarely used Stephen. I mean, look at the United States. You've got Standard Oil a century ago, you've got Bell Telephone 40 years ago, and then basically you don't have another serious divestiture in the last generation. The Microsoft breakup never went ahead.

CENATIEMPO: They're rarely used because they are there as a deterrent. And if you look at, and the Food and Grocery sector is a is a classic example of this, particularly if you look at, say the UK and the US, the market share of the big players over there is significantly lower than ours are. So they don't have to use them, but they're there as a deterrent.

LEIGH: I don't think they've acted as a significant deterrent. I don't know there’s much economic evidence for that. I don't see any evidence that there are countries that are breaking up supermarkets or that supermarkets in other countries are scared by the prospect of divestiture powers. They're just such a rarely used tool.

CENATIEMPO: Well the markets here would suggest otherwise.

LEIGH: Yeah, I mean, we certainly have a highly concentrated sector in supermarkets, but the United States economy has become more concentrated over the course of the last generation, despite the presence of divestiture powers. Which is why they too, like us, are looking at serious competition reforms. And ultimately, Stephen, this is all about turbocharging productivity, which was languishing under the former Coalition government when productivity languished and living standards languished. So if we want to boost wages and boost household incomes, competition is a big part of that.

CENATIEMPO: Andrew, I always appreciate your time. We'll talk again in a couple of weeks.

LEIGH: Likewise, thanks Stephen.