Andrew Leigh

E&OE TRANSCRIPT
RADIO INTERVIEW
ABC RADIO MELBOURNE WITH ALI MOORE
MONDAY, 8 APRIL 2024

SUBJECTS: Divestiture powers for competition regulators, the government’s work to improve supermarket competition.

ALI MOORE, HOST: Well, as I said, we've been talking about how to make the supermarkets play fair for a long time. Today, one recommendation, a mandatory code of conduct and you've been hearing about that during the news today with the Interim Report of the Review into the Food and Grocery Code of Conduct, which right now, of course, is not mandatory, it's voluntary.

Now, that Review also recommends hefty fines. What difference would they make? And will the government accept the recommendations? Dr Andrew Leigh is the Assistant Minister for Competition, Charities and Treasury. Dr Leigh, welcome to Drive.

ASSISTANT MINISTER ANDREW LEIGH: Thanks, Ali. Great to be with you and your listeners.

MOORE: Eight firm recommendations as part of this Interim Report. Are you taking them all up?

LEIGH: We're certainly taking them seriously and we're working through with Craig Emerson what the implications of that will be. As he moves towards the final report, he'll look at things like the application of those fines and engage constructively with suppliers and supermarkets as he's done. I've got to say, Craig's done a power of work on this report, reflecting his status as one of Australia's top policy economists and his deep understanding of the issues through a competition lens.

Now, we recognise that the way in which the Liberal Party and the National Party set up the Food and Grocery Code of Conduct as a voluntary code has attracted a lot of criticism. And Craig Emerson's recommendation is that for the first time, the Food and Grocery Code of Conduct should have some teeth.

MOORE: So, you'll make it mandatory? That would be the first thing you'll accept?

LEIGH: We're certainly taking the recommendations very seriously. Craig will move to a final report, but we take this seriously, and certainly this is an indication as to where the Government is looking to go.

MOORE: Do you think the fines, though, hit the mark? It's around $10 million, or it's a certain percentage of turnover, or it's a certain percentage of the amount that a supermarket would have made through whatever it is that they have been done for transgressing, if you like. Are we talking appropriate quantums?

LEIGH: If you're talking 10 per cent of turnover, that is a multi-billion dollar fine for a large supermarket but that would, of course, only be for the most egregious misconduct. These are the fines that are in place in the competition law for any breach of competition laws, and the point that Craig Emerson has made is that if you bring the Food and Grocery Code of Conduct into the ACCC, then that's the standard penalty regime. You'll be looking at the greater of $10 million, 10 per cent of turnover, or three times the ill-gotten gains. But Craig will look through the precise way in which that applies. The point is that right now you've got a Code of Conduct without significant penalties attached to it because that's the way the Liberals and Nationals designed it.

MOORE: It's also though a code of conduct where people hail it as a success because of the limited number of issues that have arisen under it, whereas the point that is made today by Craig Emerson is that there's a real issue among suppliers concerned about making a complaint and bringing a complaint. And another of his recommendations goes to the ability to make confidential complaints direct to the ACCC. Do you accept that recommendation?

LEIGH: I certainly accept that there's a concern man, Ali. If there's 1000 people complaining, then you're worried. But I think you're also worried if there's zero people complaining. It starts to make you think, "Oh maybe people are worried about retribution?".

And that's exactly the sort of evidence that Craig Emerson has been hearing. So, again, having an independent complaints mechanism which is at arm's length from the supermarkets does strike us as being a sensible recommendation. We want to work through the recommendations that Craig Emerson has made to us but this is a matter of ensuring that the disputes process is fair and that farmers and families get a fair deal.

MOORE: You're listening to Dr Andrew Leigh, Assistant Minister for Competition, Charities, and Treasury, and we're talking about this, I think, first step towards whether rubber really will hit the road in terms of trying to get a fairer deal from supermarkets.

Dr Leigh, people listening probably are not too worried about the regulatory system, but they're very worried about what impact that's going to have on them, either as a supplier or as a customer. A couple of questions - if you put in place big fines, how do you know they don't just get passed on to the consumer?

LEIGH: That applies to any sort of corporate penalty, I think, Ali, it's not a reason to avoid fining companies that do the wrong thing. The fact is that ultimately you need to have a strong penalty regime. One of the first things we did upon winning office was to increase the penalty for anti-competitive conduct under the competition law because we didn't want them to be merely a cost of doing business.

You can't be in a situation where companies effectively say look, "We're going to break the law because the penalties are so low that it's better for our shareholders if we break the law and pay the fine". You need those fines to be substantial - increasing them was one of our first orders of business. That is about creating a more dynamic and competitive ecosystem.

But it also sits alongside the other things we're doing; quarterly price monitoring from CHOICE, which will be reporting for the first time sometime around the end of June; an ACCC inquiry into the supermarkets; and then revamping National Competition Policy, by working with states and territories on ensuring that the Australian economy is as competitive as it can be after a decade of lousy productivity growth under the former government.

MOORE: If I can ask you about the rejection by Dr Emerson, and I note also Treasurer Jim Chalmers, along the same lines of any idea of breaking the supermarkets up of having any divestiture power. Can I just play you a little of what, Craig Emerson, Dr Craig Emerson said on Mornings this morning.

EMERSON: Who are we going to sell them to? Let's say it's Coles - just, I'm not reflecting on Coles. So, Coles is - oh, so the only buyer is Woolworths. What's that achieved? It's the same level of market concentration - it says that the deck chairs have been changed.

Someone might say, "Oh, how about we offer it to an overseas buyer?".Well, they can come in now, right now - they don't need a forced divestiture thing. So, what I'm saying is that forced divestiture sounds, you know, all very tough and muscular, but it's not a credible threat.

MOORE: My question to you, Dr Andrew Leigh, is the point being made. There is an overseas buyer could come in now, but in actual fact they can't if there's nothing to buy. It just sort of seems to me what Dr Emerson was saying didn't make sense.

LEIGH: No, I mean, I think Craig is making a point that has been made by past competition reviews. The Hilmer review didn't recommend divestiture, The Harper review didn't recommend divestiture. You don't see the National Farmers Federation supporting divestiture. The Australian Council of Trade Unions have said that they've got concerns about the impact of divestiture on workers. When you look around the world, I don't see other advanced economies breaking up their supermarkets.

MOORE: But a number of advanced economies have it as a reserve power.

LEIGH: They do, but it's very rarely used and I'm not aware of it being used in the supermarket context. The fact is that Peter Dutton, at the start of the year was saying that Australians should boycott Woolworths and the point that many people made when he said that was, look, this is Australia's biggest private sector employer, there are 200,000 workers who'd be affected by your harebrained proposal to boycott Woolies. Now he's out there arguing for divestiture, which most of the experts don't see as the primary tool for tackling the competition problem.

MOORE: I guess not a primary tool, but a tool in the background. I mean, just going to this point about being able to bring in overseas buyers, one of the problems is that they can't get sites, sites are locked up by the major players.

So, I'm not saying that you should hold as [indistinct' as going to these private companies and say, "Right, 50 per cent of your supermarkets have got to go tomorrow.". But if you have it there in the background, you don't think it would help to focus some minds on better behaviour?

LEIGH: You look at, say the United States which has had forced divestiture powers, what have they done over the time in which they've had it? Well, you had the Standard Oil breakup over a century ago. You had the Bell Telecom breakup – that’s about forty years ago and then you had the proposed Microsoft break up, which didn’t end up going ahead.

Now these are powers which are very rarely used and in that sense really are not seen by most experts as being the solution to the competition problem. Unlike putting teeth in the Food and Grocery Code of Conduct, unlike revamping National Competition Policy which worked to turbocharge competition in the 1990s. We’re working from a very successful playbook in looking to revamp National Competition Policy for the data and digital age. We’re focused on things that will make a difference for families, whereas Peter Dutton is just always thinking about how he can get the next cheap headline.

MOORE: Dr Andrew Leigh, thank you for talking to us.

LEIGH: Thanks so much.