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The radical proposal to punish supermarkets amid cost-of-living crisis

Source: The New Daily

The Nationals and the Greens have formed an unlikely union over their desire to break up the country’s supermarket duopoly, in a plan that an expert believes would work in Australia as it has done elsewhere.

The Greens have introduced legislation that will allow the Australian Competition and Consumer Commission (ACCC) the ability to force large companies to be broken up and divested into smaller entities to force them to change their behaviour.

The Nationals have previously called for similar legislation to combat the power of supermarkets over farmers, but Prime Minister Anthony Albanese rejected the idea, likening it to the behaviour of the Soviet Union.

Matt Grudnoff, an economist at The Australia Institute, said the presence of divestiture powers would encourage firms to act more responsibly.

“If they believe there are no consequences for price gouging and attempting to use their market power to gain an advantage for their shareholders, then they are more likely to do that,” he said.

“There isn’t much of an argument that it can’t be done here and that Australia is a special case.”

Nick McKim, Greens senator and economic justice spokesperson, said the supermarkets have had too easy for too long.

“We need to stop supermarket corporations ruthlessly using their market power to gouge prices while raking in billions of dollars in profits,” he said.

“The market domination of Coles and Woolworths gives them the power to crush farmers, squeeze out competition and shaft their customers.”

Overseas

Countries like the United States, the United Kingdom and the Netherlands have similar laws, where under certain circumstances firms like supermarkets can be broken up by court or government order.

Grudnoff said other countries have implemented divestiture powers in several ways.

“You could put all of those powers into the ACCC, and then they would go through a process of working out if a company had breached certain thresholds,” he said.

“Or you could invest those powers in a court and the ACCC would effectively take the prosecutor role and they would take companies they believed had breached the threshold before a court.”

The US last used its divestiture powers in 1982 to break up the American Telephone and Telegraph Company into eight entities, including the modern-day AT&T.

Although the European Union has laws making divesture possible, it has never used it because it is “a last-resort remedy to address violations of the cartel prohibition or the abuse of market power.”

Previous attempts

Nationals senator Bridget McKenzie said her party still supports divestiture powers.

“The US [and] a whole range of our G20 competitors have divestiture powers, as a way to mitigate against duopolies and the misuse of market powers,” she told Today on Tuesday.

“It’s something that we’ve been very strong proponents of for a long time.”

Qantas

Bridget McKenzie said the Nationals continue to support divestiture powers. Photo: AAP

Australia’s supermarket giants Coles and Woolworths are facing intense scrutiny over practices, price gouging and profiteering, but it isn’t the first time there have been calls to create new divestiture powers.

Nick Xenophon, a former independent senator from South Australia, introduced legislation in 2014 that would have allowed the ACCC to apply to a court for a divestiture order.

A Senate economic legislation committee said the legislation “would risk significant disruption and economic damage, with unpredictable consequences for competition” and that it should not be passed.

Grudnoff said importantly, the powers would apply to all markets, not just groceries.

“There are a lot of markets where we’ve seen competition decrease and more concentration,” he said.

“This would apply to all sorts of things like banking, insurance and other markets as well.”

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