Senate Inquiry looks at Supermarket Behaviour

EastAUSmilk President Joe Bradley appeared before the Senate Select Committee Inquiry into Supermarket Prices on 13 March, following the submission we made in February. Since then, the Committee has heard from other industry bodies including Australian Dairy Products Federation, consumer groups, government departments, small business organisations, individual businesses, and, of course, the big supermarkets.

The big supermarkets are both now on record as being supportive of a mandatory Food and Grocery Code, which is positive. However, in their evidence to the Senate Committee, both Coles and Woolworths denied any problems with their pricing, purchasing, behaviour, and culture, in spite of the very clear findings in the Interim Report of the Emerson Review of the Food and Grocery Code.

Whistleblowers and former industry insiders spoke at length about the tactics used by supermarkets to maximize profits, including predatory pricing, unfair contract terms, imposition of fees and charges on suppliers, bullying, use of private label brands to block branded suppliers, and pressuring suppliers to lower prices. Many allegations were made about the way the big supermarkets bully and retaliate against suppliers, including threats of contract termination, reduction in orders or shelf space, exclusion from promotions, imposition of additional costs or penalties, delayed payments, or payment terms changes, blacklisting or exclusion from supplier lists, and pressuring other business partners.

These allegations are entirely consistent with the submissions made by eastAUSmilk to the Senate Committee, and also to the Emerson Review of the Food and Grocery Code.

There have been improvements by some retailers in recent years, especially by those retailers including Coles who now have a significant number of direct suppliers. EastAUSmilk knows many of our members have excellent relations with supermarkets for whom they are direct suppliers, which is definitely positive.

Both supermarkets received a grilling by the Committee, particularly the outgoing Woolworths Chief Executive Officer Brad Banducci. Unfortunately for Mr Banducci and Woolworths, his performance at the senate hearing was poor. His inability to answer a large number of simple questions frustrated the Chair, who threatened Mr Banducci with jail several times for failing to answer these questions.

In and around the hearings, various proposals have been advanced to reign in the abuse of their market power by big supermarkets. Some of those suggestions were to legislate to give the government the power to force big retailers to be broken up into smaller units, to legislate to require supermarkets to stop buying up plots of land in order to block competitors setting up nearby, and of course a range of measures designed to stop bullying and reprisals by supermarkets.

The Senate Committee inquiry was supposed to wrap up last week but is now considering whether to seek evidence from several large multinational food manufacturers such as Coca-Cola and Nestlé.

By Mike Smith, eastAUSmilk government relations manager