Andrew Leigh

E&OE TRANSCRIPT
RADIO INTERVIEW
2CC BREAKFAST
TUESDAY, 20 FEBRUARY 2024

SUBJECTS: Non-compete clauses in employment contracts, designated complaints to the competition watchdog, supermarket competition.

STEPHEN CENATIEMPO, HOST: Time to talk federal politics with the Member for Fenner and Assistant Minister for Competition, Charities and Treasury, Andrew Leigh. Andrew, good morning.

ASSISTANT MINISTER FOR COMPETITION, CHARTIES, TREASURY AND EMPLOYMENT ANDREW LEIGH: Good morning, Stephen. Great to be with you and your listeners.

CENATIEMPO: Now lots to talk about this morning. I want to talk about this non-compete clause changes. So, I mean, look, I’m in two minds about this. I – you know, part of me says well, if you leave a job you have the right to go and get another one. But then there’s always the fear that you take, you know, intellectual property from your previous employer and it benefits somebody else?

LEIGH: Well, Stephen, there’s a couple of ways of seeing non-compete clauses. So you can see them as important in terms of workers’ wages. The biggest wage gains people typically get in a career are when they switch jobs. Making it harder to switch to a better paying job might be one of the reasons why we’ve just seen the lousiest decade of real wage growth in the post-war period.

The other way of seeing it is basic freedoms – that there ought to be a freedom to shift from one employer to another. If you look at the most innovative place on the planet – Silicon Valley – California banned non-competes decades ago, and that hasn’t stopped the growth of a whole lot of innovative firms. So innovation doesn’t depend on locking your workers in.

What’s worrying about some of the recent data, the e61 survey we had out last year, is that it suggested non-compete clauses aren’t just being used for executives but for yoga instructors, early childcare workers and hairdressers.

CENATIEMPO: Yeah, look – and I understand that. But surely there’s a place for them somewhere. I mean, how broad are you looking at changing things? Well, when I say how broad, how broadly I should say.

LEIGH: We’ve asked the competition taskforce to look into it and we haven’t reached a settled view. At the moment non-competes haven’t really been discussed. They’ve just emerged in recent years. Employment lawyers tell me because a lot of employment contracts are just standard form. So whether you’re talking about an early childhood worker or an executive, companies have been putting non-compete clauses in.

There’s a lot of evidence overseas that this can stymie wage growth, an e61 survey suggesting that it might be costing thousands of dollars for some workers. And if an employer wants to ensure that the workers don’t take confidential information, there’s direct ways of making sure they don’t do that. They don’t need to prevent workers leaving.

CENATIEMPO: Yeah, look, I think obviously to our industry and, I mean, well, I’m not somebody that has to worry about it, but, you know, take sort of television hosts et cetera who are obviously being poached because they have a following that is then going to – I mean, are these kinds of situations going to be ruled out in your view? I mean, how do you view this? Should it be just a blanket ban on non-compete clauses or will there be exceptions to the rule?

LEIGH: We haven’t reached a settled view. That’s the right question to be asking. We’re still bringing in the evidence. We’ve got the Australian Bureau of Statistics that has added a new module to the Employee Earnings and Hours Survey which looks into non-compete clauses, and that will be reporting later this week. So we do need to gather the data. I’m an evidence-based person; I’ll go where the data says. But I don’t think that the current situation where one in five workers according to e61 are bound by a non-compete clause, I don’t think that’s tenable. I don’t think many people when I tell them that early childhood workers are barred by non-compete clauses from immediately moving to a better job – I don’t meet many people who say, “Well, that’s the way the world should be.”

CENATIEMPO: Yeah, yeah. No, and I think that’s a fair call. Now, you’re about – or you’ve introduced legislation to change the way complaints are reported to the ACCC. Explain that to us.

LEIGH: So at the moment a complaint that comes from a peak body, small business or a consumer body is treated like every other complaint to the competition watchdog. What we’re saying is that a couple of times a year, those big peak organisations ought to be able gather up evidence of systemic misconduct and report it to the regulator for a fast-track look. This would be a complaint that’s dealt with within 90 days and ensures that we respect the role that those peak consumer and small business groups play.

That might be small firms not getting paid on time, it might be drip pricing by airlines, it could be misconduct in the supermarket sector. If any of those issues come to the attention of the peak bodies under this new law they’ll be able to raise them with the regulator and get a speedy reply.

CENATIEMPO: Let’s talk about the supermarkets for a moment, because you’ve also flagged changes to mergers and reforming the way, you know – and I guess that’s about competition. The supermarkets, though, seem to have developed this power, the duopoly without having to worry about mergers. So, I mean, obviously this is – are we looking at trying to avoid other situations like we see with the supermarkets? I mean, what’s the rationale behind this?

LEIGH: Well, supermarkets did actually become the scale they currently are through a whole series of mergers, buying up stores such as Franklin and Safeway. Coles and Woolies started with about 20 per cent market share if you go back to the 1950s then grew that principally through mergers. We’re not looking to unscramble the egg there but merger laws do create larger firms if mergers are left unchecked.

CENATIEMPO: Your memory is better than mine, because I just thought they fell by the wayside, some of those old ones.

LEIGH: Some of them did, you’re quite right – it’s certainly a combination of the two. In some cases they bought up some of the best stores and then some of the underperforming stores ended up falling by the wayside. They didn’t always buy a whole chain; they bought particular stores.

CENATIEMPO: Yeah.

LEIGH: The ability of a large firm to aggregate smaller competitors really is a challenge for consumers because we know basic economics says if you’ve got fewer places to shop, then prices will be higher.

CENATIEMPO: But are we approaching this from the wrong angle? Rather than prevent mergers, shouldn’t we be making it easier and, you know, getting out of the way of smaller businesses and allowing them to prosper? Because I think – you know, I grew up in the fruit industry, and the number of small greengrocers around the place has diminished drastically, despite the fact that they’re still the best place to buy your fruit and vegetables. They’re few and far between these days because doing – running a small business is tough.

LEIGH: I remember the old comedy routine Con the Fruiterer, and I wonder how many people now would remember a fruiterer or know what it is. Many youngsters probably think that supermarkets are the only place you buy your fruit and vegies and I agree with you – that’s a pity. We’ve got Craig Emerson, a former Minister for Competition, reviewing the Fruit and Grocery Code of Conduct and looking at whether it should be made mandatory. We’ve got the competition watchdog now doing a deep dive into supermarket prices and allegations of price gouging among the supermarkets. Some of your listeners will have seen the Four Corners episode last night with a number of troubling allegations, and the government is taking action to make sure that suppliers and consumers get a better deal.

CENATIEMPO: Yeah, look, the problem I see with that, I mean, I look at that – the issue of price gouging and I think, well, their share price doesn’t indicate price gouging. Their overall profit margin doesn’t, and when you look at the examples that are being thrown around, as somebody that knows the entire supply chain when it comes to fresh produce, I look at it and think, “Well, there’s no gouging happening there.” Are we approaches this from the wrong angle? It should be about what the farmers are getting paid, not what we’re being charged?

LEIGH: I think it’s about better prices, and better prices for this Government means better prices for suppliers and for consumers. We know that the profit margins in the supermarket sector are higher in Australia than in many other comparable countries. We know we’ve got more market concentration in our supermarket sector than they do, say, in Britain or the United States. And we know also, Stephen, that the entry of foreign competitors such as Aldi did place downward pressure on prices, and I think it was a pity when Kaufland was unable to expand its supermarket offering here.

It's important that people have choice when they shop. That’s one of the basic principles of a market economy. As an economist I believe passionately in competition. I’d like to see more of it right across the economy.

CENATIEMPO: It would be good if we had more local supermarket operators opening up rather than imported ones.

Andrew, good to talk with you. We’ll catch up in a couple of weeks.

LEIGH: Thanks so much, Stephen.