“Effect Test” Needed for Supermarket Competition

The ACCC’s action against Coles shows that we need an “effects test” to curb anti-competitive behaviour, Senator Matt Canavan said today.

“We cannot know whether Woolworths is guilty till the court decides, but what we do know is that, even if they are, the maximum penalty the court can impose is just $10 million.

“This is clearly a slap on the wrist for a company with an annual turnover of $42 billion.

“If instead the ACCC could take action under a section 46 that worked, Woolworths could face fines up to 10 per cent of its turnover, or $4.2 billion. There is just a slight difference between $10 million and $4.2 billion.

“But the ACCC has said that section 46 has become too difficult to prove and it generally no longer uses it. We need to improve this provision in line with the ACCC’s recommendations for an effects test.”

Senator Canavan was speaking after the Australian Competition and Consumer Commission yesterday announced it has instituted proceedings in the Federal Court against Woolworths Limited for unconscionable conduct, and Treasurer Scott Morrison today released a discussion paper on section 46 of the Competition and Consumer Act 2010 – the misuse of market power provision.

“No assumptions can be made about the behaviour of Woolworths until the ACCC claims have been tested before the Federal Court. However, the fact the ACCC has launched this action – and the ACCC’s successful action against Coles in 2014 – point to the need for strong deterrents.

“In the case of Coles, the Federal Court fined them $10 million, the maximum penalty permitted. In her December 2014 judgment Justice Michelle Gordon said: “The current maximum penalties are arguably inadequate for a corporation the size of Coles.”

Senator Canavan said he welcomed today’s release of a discussion paper on section 46.

“I encourage business operators to respond, especially suppliers to the major supermarkets and other retailers. It is also an opportunity for big business to put some constructive proposals on the table to reform our competition law.

“This is not just a matter of fairness. Intimidation and blackmail have a serious impact on competition as they reduce incentives to compete and invest in new industries and products.”

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