Australia should introduce new nationwide fair trading laws to better protect small businesses, and impose penalties on companies that contravene the Food and Grocery Code, according to the Australian Competition and Consumer Commission.
The recommendations come as the competition watchdog on Thursday released the results of its inquiry into the perishable goods market.
The ACCC’s report also recommends small business unfair contract terms be strengthened, a process that is already underway, and that governments and industries find ways to increase price transparency as a way to boost competition.
The federal government asked the ACCC in August to examine reports about harmful conduct and power imbalances between the farmers, processors and retailers of meat products, eggs, seafood, dairy products and horticultural goods.
ACCC deputy chair Mick Keogh said in a statement the fact there are many more farmers than processors, wholesalers and retailers, means farmers are “particularly vulnerable” to competition concerns, and their bargaining power is often further weakened for more perishable products.
At the same time, the ACCC found a lack of price transparency in these markets is also creating power imbalances.
“The effects of imbalances in bargaining power can weaken confidence in markets, reduce incentives to invest, and result in slower productivity growth,” Keogh said.
The ACCC received more than 80 submissions to the three-month inquiry, through which it heard allegations of harmful conduct across all perishable agricultural industries, including cases of supply terms being altered unilaterally and suppliers being subject to commercial retribution if they sought a price increase or raised concerns about the conduct of another party.
However, the watchdog said the most serious allegations came from the chicken meat and horticultural sectors, and it will now investigate some of these claims.
While work is already underway on a number of fronts to improve small business protections, including via a new small business collective bargaining class exemption that will come into effect in early-2021, the ACCC said a nationwide ban on unfair trading practices is needed to address the serious conduct it heard about through the inquiry.
“Australian governments and agencies are already discussing a potential prohibition on unfair trading practices, and the findings of our report are further evidence that it’s needed,” Keogh said.
The ACCC found the introduction of the mandatory Dairy Code in January 2020 has improved price transparency and allowed farmers to more easily switch between processions, which has improved competition in the sector.
However, it said the Food and Grocery Code should be made mandatory and include penalties for those who contravene it.
Responding to the report on Thursday, Agriculture Minister David Littleproud and Assistant Treasurer Michael Sukkar did not comment directly on the call for a national ban on unfair trading practices, but said the government will now consider the ACCC’s findings and recommendations “in detail”.
“The government is progressing a number of initiatives that support the findings and recommendations of the ACCC, including legislations to strengthen unfair contract term protections under the Australian Consumer Law, enhancing the Food and Grocery Code of Conduct and improving price transparency for the dairy industry under the Dairy Code,” they added.