Andrew Leigh

E&OE TRANSCRIPT
TV INTERVIEW
ABC AFTERNOON BRIEFING WITH GREG JENNETT
MONDAY, 8 APRIL 2024

SUBJECTS: Reforms to the Food and Grocery Code, divestiture powers, merger reforms, non-compete clauses.

GREG JENNETT, HOST: So, a mandatory code of conduct is on the way, or soon will be for Woolworths, Coles, Aldi and Metcash. That is the interim recommendation from Craig Emerson. But that represents only a part of the project the Government's doing on competition. Assistant Minister for Competition Andrew Leigh joins us in the studio now. Welcome back to the programme, Andrew. So, a firm recommendation just to clarify the status of Craig Emerson's advice in the Interim Report. He says a firm recommendation. There's no doubt, is there, that the Government will proceed with this mandatory code?

ASSISTANT MINISTER ANDREW LEIGH: Well, we clearly need to go through cabinet and caucus processes, but we're certainly looking very seriously at the important recommendations that Craig Emerson has made. And I was pleased, Greg, that you put that into context. The broader work that we're doing on competition, the ACCC's grocery review, the CHOICE price monitoring to ensure Australians can see where they can get the best deal, the first report of which will be coming out towards the end of June.

JENNETT: Yes. So, as part of that body of work, everyone's obviously coming at the problem of market failure, the power imbalance here. It's not confined, though, is it, to fresh food and groceries, as you would see on supermarket shelves. Also, arguably, to hardware giants, Bunnings is the common brand name to alcohol retailers. 70% market concentration there. Could the mandatory code be extended to cover those sectors?

LEIGH: That's not one of the recommendations that Craig Emerson has made. His main focus, Greg, is on ensuring that the Food and Grocery Code of Conduct works well in the context it's currently operating. So, that's on retailers with more than $5 billion of turnover, the four that you mentioned there. He's also recommending that it become a code with teeth, unlike the former code put in place by the Liberals and Nationals in 2015, which is a voluntary code.

JENNETT. So, how persuasive have the submissions been to you? And you've seen a lot of them, not to mention the parliamentary inquiries, but just in your own line of work, you'll be familiar with what the ACCC has said, what Allan Fels has done for the trade unions and his own personal recommendations. What makes you think that the Craig Emerson position is superior to those which support forced divestiture?

LEIGH: Divestiture is a power that's not often used in the countries in which it operates and I'm not aware of a major advanced economy that's looked to break up supermarkets. It is not a recommendation that was supported by most former competition recommendations: the Harper Review; the Hilmer Review; the Dawson Report; none of them recommended forced divestiture. The National Farmers Federation don't support it and the Australian Council of Trade Unions point out that it could have adverse impacts on workers.

JENNETT: When you say no country has done it, that doesn't mean it's not on their statute books though, does it? Because the UK for one, is cited very regularly as someone with a power, sure, a dormant power, but one that it just sits in the background there to keep the parties honest, as it were.

LEIGH: That's right but they haven't set about breaking up Tesco's. And if you look at the US power; it was used for Standard Oil a century ago; it was used for Bell Telecom 40 years ago; but the most recent major attempt to use it was in the attempt to break up Microsoft, which ended up not getting through the courts. So, it's a power that is used very rarely. And just as Peter Dutton was calling on Australians to boycott Woolworths at the start of the year, now he wants to break up Woolworths. We're aware Woolworths is Australia's biggest private sector employer. 200,000 Australians work at Woolworths, and you want to be pretty careful adopting approaches which could be harmful to them and which in the view of many experts, wouldn't help consumers.

JENNETT: And is market concentration limitless in that sector then? I mean, if you got above 80%, and I think it's in the seventies now, would there not be some level at which you'd be prepared to consider divestiture as the only remedy to what would effectively be creeping acquisitions, I suppose?

LEIGH: As the Treasurer noted in our press conference this morning, he'll be announcing on Wednesday morning the Government's proposals on mergers. The Australian Government hasn’t had a serious look at Australia's merger regime for over a decade now. We're aware that the ACCC only gets to see about a quarter of all mergers. So, it is important that our merger regimes up to date, that's really our focus when it comes to market concentration, which, as you say, Greg, has risen over recent decades. We've seen a rise in market concentration, a rise in mark ups, and, under the former government, we had the lousiest decade of productivity growth in the post war era. So, competition really is at the heart of Labor's focus for a more dynamic economy.

JENNETT: Well, as the House Economics Committee recently reported, and we spoke to your colleague Dan Mulino. There's this constant trade-off between productivity enhancing red tape reform and then the sort of processes you're talking about. Higher visibility by the ACCC over, if not every, merger and acquisition in this country, certainly more than they've been watching so far. As you move down this path, how do you know you won't gum up the economy by making it too onerous on a Coles or a Woolies to buy a store here and there?

LEIGH: I'm very glad you mentioned Daniel Mulino's terrific report. He and his colleagues have done a power of work and I note that that's another report with a lot of recommendations, but which doesn't recommend divestiture power. Most mergers will be productivity enhancing, will provide efficiencies. So, what's really important through our merger regime is that we're analysing the right set of mergers. And the Treasurer will have much more to say about that on Wednesday.

JENNETT: All right and I think you've had a bit to say recently on a subject we did discuss with you on this programme when you were last here. Andrew Leigh, non-compete clauses. It sounds like you're progressing towards a harder position on that. Is it your predisposition to move towards some ban or how would you limit their seemingly rampant use?

LEIGH: Well, I launched an issues paper last week. Anyone who's interested in the topic can have their say at treasury.gov.au. And that's really a recognition, Greg, that these clauses have become widespread across the economy. One in five workers, including hairdressers and security guards, are subject to non-compete clauses and other countries are moving on them. So, the issues paper talks about the changes that are being made in Britain, Spain, in Finland, the proposal in the United States for a nationwide ban, and the fact that five US states, including California, ban non-competes.

JENNETT: And is that a roadmap for Australia, the US approach?

LEIGH: We're looking very seriously at the issue. Obviously, this is the first stage of consultation. If we come forward with specific proposals, we'll consult on those.

JENNETT: I think you've made the point that here are other levers that could control the use of these clauses in employment arrangements, the Corporations Act being one of them. So, it could actually ban them, but have it picked up elsewhere.

LEIGH: That's right. I've called non-competes the bluntest tool in the shed, because if companies want to make sure that their trade secrets aren't walking out the door, they do have other ways of doing that. Theft is illegal, including theft of trade secrets by workers. And one of the concerns that I have, Greg, is this is being used as a tool of convenience by employers who benefit from reduced worker mobility, unlike the economy, which is harmed when we don't see an efficient movement of workers to the most productive firms.

JENNETT: Well, exactly. It might be wonky to some, but it happens to have been an interesting area to shine a light on, and we thank you for doing that. Andrew Leigh. We've been across it, wonky, though it is on this programme at regular intervals, so we'll see it through to the end with you. Really appreciate you joining us once again.

LEIGH: Thanks, Greg.