The government will create the new role of agriculture commissioner within the Australian Competition and Consumer Commission to help curb anti-competitive activities within agricultural supply chains, following long-standing public concerns about anti-competitive practices by major supermarkets.
Agriculture Minister Barnaby Joyce announced on Sunday, as part of the Agricultural Competitiveness White Paper, that the government will give the ACCC $11.4 million over four years to establish an Agricultural Enforcement and Engagement Unit with additional staff to conduct investigations and engagement in rural and regional areas, as well as a dedicated commissioner.
“The ACCC will prioritise detecting, deterring and taking action against conduct that breaches the Competition and Consumer Act (2010) that affects farmers and small businesses in rural and regional areas, particularly cartels, misuse of market power, and misleading or unconscionable conduct,” ACCC acting chair Delia Rickard said.
“The ACCC will strengthen its engagement with agricultural industries to understand factors effecting competition in rural and regional markets. This will also enable the ACCC to better explain its decisions to farmers and regional small businesses.”
Joyce said a more farm-savvy and proactive ACCC will encourage fair-trading and strengthen competition in agricultural supply chains.
“Many stakeholders were concerned with the lack of transparency in supply chains and the anti competitive distortions that can result — all too often to the detriment of our farmers,” he argued.
“The new commissioner, combined with the new dedicated agricultural-focus of the ACCC, will give the ACCC additional agricultural skills and knowledge to address the concerns of farmers.
“These new resources will enable ACCC staff to attend the saleyards or visit farmers to see the market in action and gather necessary evidence.”
Telling journalists he didn’t “want to buy into this whole Coles and Woolies thing”, Prime Minister Tony Abbott said that “the important thing is that competition is both free and fair and that’s what this is an investment in.
“… All sectors from time to time are subject to a degree of, if you like, corporate overreach and it’s important that all sectors are appropriately policed. But what we want to see is more expertise, more insight and more focus on the agricultural sector,” he stated.
In 2014 the Federal Court found that Coles had engaged in unconscionable conduct in dealings with particular suppliers. The supermarket chain was ordered to pay penalties of $10 million and costs. Coles also made a court-enforceable undertaking to the ACCC to create a formal process to provide options of redress for the more than 200 affected suppliers.
‘Knowledge is power’
The government will also give $13.8 million to furnish farmers with knowledge and materials on alternative business models such as cooperatives and collective bargaining.
“Knowledge is power,” argued Joyce. “A strong supply chain advocate, proactive ACCC investigations and information on alternative business structures will go a long way to reducing farmers’ vulnerability to the market power that can be wielded by large processors or retail chains.”
The White Paper argues that currently it’s difficult for farmers to find information on alternative business structures:
“For some farmers, considering business arrangements such as collaborative farming or bargaining collectively with other farmers can improve their negotiating positions. Increased knowledge and skills will enable more farmers to understand and capitalise on the opportunities presented by alternative business structures, including increased scale and capital investment. Collaborative farming ventures, for example, offer a business model that enables economies of scale without losing the integrity and heritage of the family farm. This approach was successfully adopted by the joint farming partnership, Bulla Burra Operations Pty Ltd, in the northern Mallee region of South Australia.
“… Farmer-owned cooperatives can also add competition in the market place if they add to the number of participants, and allow farmers to engage in additional parts of the value chain where profitable to do so. The recent success of some cooperatives has increased interest in them. But information on how to form a cooperative and the pros and cons of doing so is not readily available. The government will provide information to help support better decision making on alternative business structures.”
Market power approach was ‘poorly targeted’
ACCC chairman Rod Sims has previously raised concerns about aspects of the competition regulation regime for primary industries. In a speech in November, Sims argued that although “no changes are needed” on unconscionable conduct measures, “the current misuse of market power provision is poorly targeted and of limited utility”:
“It currently deals with, in essence, damage to individual competitors rather than to the competitive process; it allows firms with substantial market power to do any action if a smaller company can do the same thing, which is a flawed filter for behaviour of concern; and it only captures conduct which has the purpose of damaging a competitor and has no regard to what the effect of the behaviour on competition was.”
The ACCC has also recommended that it have an explicit advocacy and market studies function so it can address specific problems as they arise in particular industries, “just as overseas competition agencies do”.
The Harper competition review noted that while many agricultural producers “raise concerns that the unconscionable conduct provisions are deficient because of the lack of specific definition or the difficulty in proving that the conduct meets the standard of judicially-defined unconscionable conduct”, it the Harper panel believed “current unconscionable conduct provisions appear to be working as intended”.
The White Paper followed an 18-month consultation that attracted 1000 submissions and involved face–to–face meetings with 1100 people.