Coles, Woolies facing fine in billions if review recommendations adopted

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Misbehaving supermarkets could face hefty fines that run into the billions should new recommendations of an interim food and grocery review be adopted.

The current settings have been lashed as “not effective” by review chair Craig Emerson, who is recommending a voluntary code be made mandatory alongside big penalties for supermarkets with annual revenues exceeding $5bn.

But Australians being hit hard at the checkout will have to wait until later in the year to find out whether the recommendations will

be adopted by Treasurer Jim Chalmers.

“We want a fair go for families and a fair go for farmers,” Dr Chalmers said in a statement.

“This work is all about making our supermarkets as competitive as they can be so Australians get the best prices possible.”

Dr Emerson, a Labor former competition minister, was tasked to lead the government review into the food and grocery code – a voluntary scheme that governs how the supermarkets interact with suppliers – and whether it should continue, or be scrapped.

In his first findings, to be released on Monday, he will “firmly recommend” it continue, be made mandatory and enforceable by the Australian Competition and Consumer Commission.

“A heavy imbalance in market power between suppliers and supermarkets in Australia’s heavily concentrated supermarket industry necessitates an enforceable code of conduct,” Dr Emerson said in the interim report.

Coles, Woolworths, ALDI and Metcash and suppliers to the supermarket giants would be covered by the code.

The competition watchdog would have the power to enforce penalties for major or systemic breaches of up to $10m, 10 per cent of a supermarket’s annual turnover, or 3 times the benefit it gained from the breach, whichever is the greatest.

Coles and Woolies had a reported annual revenue of about $40 billion, meaning a fine of 10 per cent could be a record-breaking $4 billion.

A “best of both worlds” approach blending the dispute-resolution options used in the Dairy code of conduct and the quick provisions under the current voluntary code have been recommended.

The review also recommended any updated code should place a greater emphasis on addressing the fear of retribution.

Prices at the checkout have become a political lightning rod in recent months as MPs from all sides scramble to convince voters they have the better record on the cost of living.

Farmers have also been left frustrated that declining wholesale prices did not reflect similar price drops on the shelves.

Under the current settings, the ACCC does not have the power to impose penalties for non compliance of the code.

Labor has been under pressure to consider divestiture laws to break up the power of the supermarkets engaging in anti competitive behaviour.

But the report poured cold water on the idea, championed by both the Greens and the Nationals, which Prime Minister Anthony Albanese has previously described as belonging in the old Soviet Union.

“If forced divestiture resulted in a supermarket selling some of its stores to another large incumbent supermarket chain, the result could easily be greater market concentration,” it said.

Dr Emerson said the review’s recommendations constitute “a far more credible deterrent to anti-competitive behaviour than forced divestiture laws”.

In a statement, Dr Chalmers and Assistant Competition Minister Andrew Leigh called the review an “important part” of Labor’s reform agenda.

“Which includes an ACCC inquiry into supermarket prices, a $1.1 million boost in funding for supermarket price monitoring by CHOICE and a comprehensive review of the nation’s competition policy settings with a focus on easing the cost of living for Middle Australia,” they said.

It’s understood that Dr Chalmers will use a major address on Wednesday, hosted by the ACCC and the Law Council of Australia, to unveil his plans for merger reform.

The interim report will now be open for stakeholder consultation until April 26 before Dr Emerson hands back his final recommendations by the end of June.

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