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Issue #1662      October 29, 2014

Supermarket monopoly and farm ruin

The Australian Competition and Consumer Commission (ACCC) has launched legal action against Coles alleging unconscionable conduct in dealings with five suppliers. For a long time, the ACCC wouldn’t hear a word against supermarket giants Coles and Woolworths as they flexed their monopoly muscle in the grocery market. Over the past 12 months, however, the Commission has felt compelled to act on six occasions when the retailers’ actions simply couldn’t be defended any longer.

South Australian farmers protest against low milk prices.

The ACCC took action against Coles, Woolworths and three other retailers for using a subscription-only website to set petrol prices. It had previously forced Coles to apologise to customers for misleading them that frozen pre-baked bread from Ireland was “baked fresh” in their stores. It got Coles to admit that farm gate milk prices had actually fallen following the introduction of its $1 a litre milk while claiming prices to producers had risen. And last December the Commission took action again to prevent excessive fuel discounts, limiting supermarket discount vouchers to 4¢ a litre.

The latest action involves Coles pursuit of “perfect profit days” during which suppliers were pressured to pay for the cost of wastage and markdowns in stores, even when the suppliers had no control over the process. Profits for Oates cleaning products fell short of expectations by $326,590 in 2011 and Coles insisted the supplier make up the gap. The supplier resisted but then offered a lower payment of $246,000 to be paid over six weeks.

Coles deducted the full amount straight away. Oates objected and Coles agreed to repay it “from time to time”. Coles then asked Oates to pay an ongoing rebate but the supplier refused. Coles then said the decision concerning the rebate might adversely affect the cleaning company’s supply. Oates agreed to pay $365,200 in monthly instalments – $70,000 worth of rebate and $295,200 for the profit gap.

The federal government is loathe to intervene in this or any other monopoly controlled market. In fact, the draft of the Harper Review on competition policy points to even greater domination. Trading hours would be totally deregulated and restrictions preventing the sale of liquor from supermarkets would be scrapped if the draft report’s recommendations are embraced. Supermarkets would be able to sell medications as pharmacy ownership and location rules are removed.

Bucking the Coalition consensus is Agriculture Minister Barnaby Joyce. He has to answer to a rural electorate reeling under the effects of “free” market dictatorship. He commissioned a report on agricultural competitiveness and the green paper is at odds with the Harper Review on a host of fundamental issues. Joyce’s review recommends an ombudsman with penalty powers and a code of conduct for supermarkets. The powers would include divestiture enabling courts to break up businesses that repeatedly breach the law. Encouragement would be given to farmer cooperatives to collectively bargain with monopoly buyers.

The Agriculture Minister is under pressure from struggling family farmers who have seen the share of total selling cost plummet from 80-90 percent in 1900 to 10 percent or less today. Rural debt now stands at $65 billion. Incomes have stagnated or gone backwards and there has been a wave of bank foreclosures of family farms. Supermarket practices have combined with bad investment advice, reckless lending, devastating floods and droughts and the high value of the dollar to produce a bleak outlook on Australia’s farms. Hype about Australia becoming the “food bowl” of Asia is a sad joke.

There’s little doubt the Harper Review’s agenda will trump Joyce’s preferred options. An indication of the abandonment of rural Australia is the refusal of the federal government to guarantee funding to the National Centre for Farmer Health based in Hamilton, Victoria. Its award-winning Sustainable Farm Families program focuses on improving the mental and physical health, well-being and safety of farm families. Rates of suicide in rural and regional Australia are at alarming levels. State government funding dried up in 2012.

The situation screams out for an alliance of family farmers and organised labour. They are abused by the same monopolies – the farmers as producers and the workers as employees and consumers. Their combined action is crucial for the breaking up the market manipulating power of massive corporations and reversing the current economic agenda.

Next article – Editorial – Edward Gough Whitlam

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