Adjournment speech for Senator Barnaby Joyce
I rise to speak on behalf of small businesses and consumers who are being stymied by the market power of the big players in the retail market and the inherent unfairness small business has to deal with by reason of only one issue – the ever growing dominance of big business, especially big oil companies, big retailers and big retail space conglomerates.
One of the fundamental freedoms which exists in a free society is the ability to go into business, to be your own boss, to live in the closest possible connection of your exertions with your reward, to be independent of the threat that your opinions could affect your promotion, which is always part of working for someone else.
The stronger the small business sector, the more vibrant, diverse and resilient is the economy.
The stronger the small business sector, the higher the potential of freedom for all.
The economy must have new seed beds of entrepreneurship provided by small business or stagnate with the status quo.
Centralisation of the economy brings centralisation of opinion, of opportunity, and wealth.
The great inhibiters of small business are government overregulation and mismanagement, a militant industrial relations environment and the aggressive actions of participants with excessive market share.
It is this final issue of excessive market share to which I wish to address this speech as it appears to be ignored in the political debate.
If you are a big business with excessive market share, you are able to sustain a campaign that puts your smaller competitors at risk by reason of your control of the supply lines of vital inputs such as rent, produce or labour.
Big business imposes concessions which the market must recoup from smaller competitors through their lower returns.
When businesses, by their size alone are an implicit threat to competitors - then the market is imperfect and the evidence of this is emphatic.
All markets have regulation, whether it is occupational health and safety standards, zonings, or tax laws.
Inherently these laws favour one player or another – typically the bigger player. A Workplace Health and Safety Officer in a workforce of two is impossible to pay for. In a workplace of 1000, it is unnoticeable to the bottom line.
Because the truly free market is an anomaly that does not exist, there should be no issue about having regulations to ensure small business gets a fair go when it is obvious they are discriminated against.
The United States leads the way on this and has strong trade practices laws which include the Sherman Act, the Claytons Act and the Robinson and Patman Act.
The current proposed sale of Coles, and its likely purchase in part by Woolworths, would exacerbate the excessive market power that Woolworths has – and this should not be allowed to occur.
Let's look at some practical examples of what is happening and why the Trade Practices Act needs urgent strengthening to provide better checks and balances on market power.
Take for instance a meat price comparison survey conducted on the 16th of December 2006 in south west Sydney by the Southern Sydney Retailers Association.
Their research dispels the myth that bigger is cheaper and that just being cheaper is enough to survive if your competition is massive.
Coles and Woolworths' prices on a selection of meats were on average an astronomical 29 per cent higher than an independent retailer at Lansvale.
A couple of examples: Blade steak was selling for $7.99 per kilogram whilst at Woolworths consumers were being charged $12.99 per kilogram.
The independent was selling that family favourite - beef stir fry - for $12.99 whilst at Woolworths it was $18.99 per kilogram.
Playing Devil's advocate, one might say the independent was a boutique, high quality butcher.
Well, let's look at the humble onion and the Granny Smith apple.
The local independent retailer at Casula sold the brown onion at $2.29/kilogram while Woolworths was selling it for $3.67/kilogram – 47 per cent more.
Woolworths sold the Granny Smith for 50 per cent more.
These are clear examples of why the overcentralisation of the retail market is exploitation of competition. Ultimately it leads to exploitation of what is left after small business goes – the consumer.
Since 1990, food prices in the Big Two-dominated supermarket sector have risen more than 70 per cent.
In the UK, where there are more players in the retail grocery sector, price increases at the supermarket rose just over 30 per cent in the same period.
The true scandal of this situation is that in the last 10-15 years, in all other developed countries, food price inflation at the supermarket has been less than general inflation.
In Australia, supermarket food prices have risen around 18 per cent more than inflation. In contrast, in the UK, food price rises are well under inflation.
Let's take another essential household grocery item - milk.
Since 1991, the farmgate price of milk in Australia has moved in line with all other major international milk producers. Our farmers are obviously efficient.
So why have our retail milk prices increased 90 per cent since 1990? In comparison Canada's retail milk prices have risen just 51 per cent and the UK's just under 60 per cent in the same period.
Another common beverage that finds its way in to shopping trolleys is Coca Cola.
The American Chamber of Commerce Researchers Association Cost of Living Index survey in Oklahoma in the US, found that for the first quarter of 2005 the average price for a two litre bottle of Coke in supermarkets in down town Ardmore was US 94 cents. This equates to $1.30 in Australia including GST.
The Southern Sydney Retailers Association compared Coke prices in Canada where it found that the Supermarket chain "Shoppers Drug Mart" were selling a two litre bottle of Coke for 88 cents Canadian. This equates to $1.15 Australian including GST.
Woolworths occasionally reduces the price of Coke as a "special". A supermarket price here of $2.96 for a two litre bottle of Coke is not special it is extortion that you can get away with because you have no competition.
Something is wrong.
No wonder private equity firms think Coles will be a good buy. They must think they have stumbled across a real gem – we need laws strong enough to encourage competition against the large players and protect small business.
The big two retail players further increase their profits through the sweetheart deals on their rents that they enjoy in large shopping complexes – another overcentralised market – handicapping their smaller competitors.
Here are some examples of these very sweet rental deals.
At Westfield Liverpool, Coles pays just $245 per square metre per year while Bush's Meats in the same complex pays a whopping $1338 per square metre.
This is not an isolated example. At Westfield Parramatta Woolworths pays $218 per square metre versus $1529 per square metre by Prime Quality Meats.