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Is anyone really standing up for small business?

Frank Zumbo

by Frank Zumbo

26 May 05:30am

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Filed under: Accc, Competition Policy, Small Business, Supermarkets

20 comments

While politicians are always quick to say “feel good” things about small businesses being the “engine room” of the economy, few MPs from either side of politics are ready to act to ensure that we have a vibrant small business sector.

Should all roads lead to Woolies and Coles?

Why? Simply because the big end of town is very quick to shoot down any proposal that puts the spotlight on attempts by the big players to drive small businesses out of business in any way they can. Similarly, any MP that dares suggest such proposals is dismissed by the big end of town as some sort of heretic or “maverick.”

Clearly, big business and their hired guns always want their way and they will whinge loudly when they don’t get it. Sadly, they are also very good at making self interested and, even personal, attacks on those proposing stronger competition laws.

Now let’s not get confused between businesses competing on their merits for customers and businesses acting anti-competitively to destroy competitors for the sake of raising prices once the smaller competitors are taken out. Yes, businesses are there to build market share but that’s not a licence to engage in any conduct whatsoever. The United States, the home of free enterprise, has long recognised that there is a line to be drawn between pro-competitive and anti-competitive conduct. That’s why the US has long stood by their anti-trust laws.

Of course, we need to recognise that small businesses are not to be “protected” from competition. Small businesses need to sink or swim on their merits. Anti-trust or competition laws are not about picking winners or losers. Competition laws are there to safeguard competition and prevent recognised forms of anti-competitive conduct. Let’s never forget that anti-competitive conduct disadvantages consumers and for that reason alone such conduct needs to be stamped out as effectively as possible.

So what needs to happen to ensure a vibrant small business sector?

Well, first, we need a full scale review of Australia’s competition laws as proposed by the Shadow Federal Treasurer Joe Hockey last week. Given that it’s nearly 10 years since the last major review of our competition laws it’s clear that a review is now well overdue. With the Federal Government having shown real enthusiasm over the past two years for setting up Inquiries one can only hope that they show enthusiasm for a full scale review of our competition laws.

Competition laws are essential to the proper and efficient functioning of a market economy such as Australia.  Competition is a key driver of a prosperous economy and effective competition laws are critical to promoting vigorous competition.

Weak competition laws lead to weak competition in the marketplace and that’s bad news for consumers.  It’s no surprise that the United States has long had the world’s best competition laws for the simple reason that the home of free enterprise recognises that strong competition laws promote strong competition.

In contrast, Australia has some of the weakest competition laws in the world and that’s costing consumers dearly. With Australian consumers now regularly being gouged on groceries, petrol and banking services because of the overwhelming dominance of the big players in those markets, it’s obvious that Australia’s competition laws are in urgent need of repair.

Australia’s competition laws need to follow the example set by such countries as the United States and United Kingdom in the following areas:

- We need a divestiture power to enable the courts to break up large and powerful companies that act to the detriment of competition and consumers; and

- We need laws against anti-competitive price discrimination whereby different customers are charged different prices for the same goods or services without justification.

Australia also needs to move against anti-competitive creeping acquisitions where large players buy out smaller competitors in a piecemeal and anti-competitive manner over time.

Access to essential infrastructure also needs to come under the spotlight as large players are very good at locking out smaller competitors.

Gaps in our competition laws following recent court decisions also need to be fixed. These court decisions have, for example, made it harder to prosecute price fixing behaviour and to stop large and powerful companies from abusing their market power.

A review of our competition laws must also extend to reviewing the performance of the ACCC. While the big of town may be comfortable with the ACCC’s performance in recent years, it’s clear that many are not happy at the ACCC’s failure to do all it can to weed out anti-competitive conduct.

Ultimately, the ACCC can certainly do much more to promote vigorously competitive markets. Accordingly, it’s clear that the ACCC’s enforcement of our competition laws needs to be carefully scrutinised on a regular basis. Strong competition laws need to be backed up by a strong and effective regulator.

In addition to having a full scale review of our competition laws, it’s important we acknowledge those MPs who try and take a stand on behalf of small businesses and consumers. There have been some notably performances including Peter Reith’s small business reforms of 1997 and Peter Costello’s enactment of the Birdsville Amendment against anti-competitive predatory pricing.

More recently, we have had some false starts with Chris Bowen’s attempts to prevent big businesses from using unfair contract terms against small businesses being so readily discarded by his Labor Government ministerial colleague, Craig Emerson.

Let’s not forget the recent efforts by Federal Shadow Small Business Minister Bruce Billson to, for example, put the spotlight on the difficulties faced by small businesses when trying to get finance, especially from the 4 major banks. Likewise, Senator Nick Xenophon and South Australian Small Business Minister, Tom Koutsantonis’ strong stance on behalf of a small petrol operator in the Adelaide suburb of West Richmond in the operator’s fight against supermarket giant Woolworths.

Finally, credit needs to be given to Mr Tony Piccolo, a South Australian Labor MP who introduced a Caucus backed Franchising Bill late last year to incorporate a statutory duty of good faith in commercial dealings; to introduce penalties for breaches of the Franchising Code of Conduct, and to promote greater emphasis on alternative dispute resolution.

All in all, it’s essential that small business issues receive the bi-partisan political support that they deserve. Let’s not forget the vital role that small businesses play in the economy and let’s ensure that small businesses are not destroyed by big businesses intent on engaging in anti-competitive conduct to the detriment of consumers.

Most commented

20 comments

Show oldest | newest first

    • John A Neve says:

      05:49am | 26/05/10

      Frank,

      In answer to your question; Yes, the Liberal Party.
      They always do, don’t they?

      Reply

    • acker says:

      07:48am | 26/05/10

      Frank I think your story is at the crux of the problem being discussed in the other stories today about the obesity epidemic. I note the rise of corporate giants such as Woolworths, Coles, McDonalds, Kentucky Fried and Cheap Outlets like Go-Lo is in tandem with obesity rising. Back in the days of more diversified grocery and take away food outlets in the 50’s, 60’s and 70’s; and prior to mass generic cheap processed food, there was less obesity in Australia.

      Reply

    • Darren says:

      08:56am | 26/05/10

      good article - the Liberal Party certainly does not care for small business- they are more interested in looking after the interests of the corporations such as Macquarie Bank, British and American Tobacco and Rio Tinto.

      Reply

    • Ryan says:

      10:48am | 26/05/10

      @Darren : and the Labor party does?

    • John A Neve says:

      08:57am | 26/05/10

      Frank,

      In answer to your question; Yes, the Liberal party.
      We all know the Liberals look after small business or so they tell us.

      Reply

    • Pete says:

      09:05am | 26/05/10

      It’s disappointing that Craig Emerson is so incompetent in the portfolio for small business. And more alarming, is small business is only offered a choice of Tony Abbott copying Howard’s do-nothing approach to support small business. In fact, looking at the blatant price gouging small business suffers, across the board, Abbott/Rudd/Howard look more like they are on balance useless and anti- small business.

      Wouldn’t it be great if Tony Abbott had such a big mouth when it came to small business as he seems to have for his ca$hed up friends in the mining big business? The dufus doesn’t even have a policy!

      Where is the democratic choice Australia?

      Reply

    • Iva Tarbell says:

      02:46pm | 27/05/10

      While there is a debate if Rudd is the worst ever Prime Minister in our nations history , there is simply no doubt that Craig Emerson is the worst ever Small Business Minister that our nation has seen.

      Emerson seems to think that his job to as Small Business Minister is to make small business smaller.

      For small business, with “friends” like Emerson, who needs enemies ?

      And Pete, isn’t Abbott promising a lower tax rate for small business than big business ?

    • Sherlock says:

      10:02am | 26/05/10

      Frank States:

      “With Australian consumers now regularly being gouged on groceries, petrol and banking services because of the overwhelming dominance of the big players in those markets,”

      Really? Then where are the small companies selling these items cheaper? I can’t find them so perhaps you can tell me where I should look.

      Shopping for fish on the weekend I had a choice between a fishmonger or Coles. Why was Coles at least 25% cheaper than the fishmonger if the’re supposedly gouging me? As an example, I like the occasional bit of barramundi. At the fishmongers $45 at Coles $35. Now if the fishmongers were advertised as say “wild caught” I would have been quite happy to pay the extra $10. If they even had a sign that said fresh from the market this morning I might have been tempted but both item were simply “fresh barramundi fillets” so why would I pay an extra $10?

      It’s not as though I’m a supporter of big supermarkets, I brought my chicken for the small retailer who offered me a value for money price that wasn’t necessarily cheaper than Coles but I felt I was getting a better product for a similar price. However that still doesn’t mean that Coles was “gouging” it’s chicken buyers.

      It’s not just fish it’s everything.  Fish, vegetables, bread, deli meats you name it and it seem to be cheaper at the supermarkets

      It’s not Coles or Woolies where I feel I’m being gouged but the small retailer who somehow thinks I’m going to pay him $49.95 for flathead fillets (sorry people never going to happen) or $4 for a lettuce that makes me feel I’m being taken for a ride.

      It easy to make these big allegations but how about backing them up. Tell me where I can find somewhere cheaper that’s convenient and open when I need them and I, like most other people, will change where we shop.

      Reply

    • rob foster says:

      10:58am | 26/05/10

      Sherlock, i think you need to find Holmes as you need help. Of course Woolworths and Coles can provide food cheaper because they have the farmers over a barrel. They say to the farmers we will pay so much for your produce, don’t like it stiff, try and sell it elsewhere.

    • Sherlock says:

      02:07pm | 26/05/10

      Rob

      I think you missed the point a bit. You may be right about the farmers and supermarkets. However that doesn’t address the issue where the author of this article wrote

      “With Australian consumers now regularly being gouged on groceries, petrol and banking services because of the overwhelming dominance of the big players in those markets,”

      My point is that unless you can tell me where there may be independents doing it cheaper than you can’t repeatedly tell me I’m being gouged.

    • Peter says:

      07:10pm | 26/05/10

      The supermarket fish has probably been frozen for 2 months and imported.. The fish monger’s fish is most likely fresh..

    • Sherlock says:

      07:39am | 27/05/10

      Sorry Peter

      I can definitely tell the difference between fresh and frozen seafood and the supermarket fish has never been frozen. What I worry about is how long since they took delivery of the fish which is why I said if the fishmonger had a sign that said something like “Fresh from the market this morning” I might have paid the extra money.

      However there was nothing to distinguish between the two products which to me is really poor marketing from a small business. If it was my shop I’d be wanting to establish a clear point of difference between my produce and the cheaper supermarket.

    • Iva Tarbell says:

      02:14pm | 27/05/10

      Sherlock,

      You ask “where are the small companies selling these items cheaper ?” 

      Obviously Sherlock, you need to get out more.

      Go to any small independent bread shop (outside of a big shopping centre) and you’ll find bread much cheaper (and fresher) than the supermarkets duopoly.

      Ditto any fruit barn (outside a big shopping centre) – they’ll have prices substantially cheaper (and produce fresher) than the big supermarkets.

      As an another example Sherlock,  I like the occasional bit of jarsleberg cheese. At the local independent fruit barn $21.99kg at the supermarket duopoly $28.99

      How do these small local business do it ? 

      The answer is that these small business (outside of big shoppings centres) are simply more efficient that the bureaucratic structures of the supermarket giants.

      Where small business can compete on a level playing field, their entrepreneurial efficiencies enable then to slaughter the supermarket duopoly.

      But then why is the supermarket duopoly so strong in Australia you may ask ?

      The answer is simple - our competition laws don’t work – and this has destroyed opportunity and the level playing field, by throwing up an umbrella of protection for the supermarket duopoly to hide behind.

      And with this special privilege and protection from competition, the supermarket duopolies inefficiencies have festered to such an extent that Australian consumers are punished with the fastest accelerating supermarket prices in the developed world.

      And one last thing Sherlock, the Fishmonger that you refer to is probably paying $2,000 per m2 for rent, while Coles is paying just $150 per m2.

    • Sherlock says:

      03:20pm | 27/05/10

      I don;t know where you live Iva but it’s not like that where live. Perhaps far out west where rents are cheaper it may happen but certainly not in the inner suburbs. There are a number of local fruit shops around but their not cheap. I went to a fishmonger on the local main street who wanted $49 a kilo for flathead. (I don’t think so) I can buy woolies bread freshly baked in store for $1.99 a loaf.

      The independents simply aren’t cheaper. This is why I challenge Frank Zumbo on his repeated allegations that consumers are being gouged by the big boys.

      I can’t buy food cheaper from the independents, or petrol or my banking business.

      As for your rent comment it’s standard business practice. The larger the area the cheaper per square metre it is. Anyway, a small independent isn’t going to anywhere near the same percentage running costs as the big boys nor would they survive on their margins.

    • Cameron Price-Austin says:

      01:10pm | 26/05/10

      Sherlock,

      Google ‘predatory pricing’

      Reply

    • Sherlock says:

      02:03pm | 26/05/10

      I know what predatory pricing is and this isn’t an example. It’s not limited to one supermarket over a particular fishmonger or fruit shop. The simple fact that Frank constantly misses with his unfounded allegations is that both Coles and Woolworth’s are constantly cheaper than the independent stores. This is why, despite repeatedly making these allegations, he can never point is to where other retailers are doing it cheaper and better.

      I’m happy to purchase elsewhere but I’m not paying $5 for something I can purchase for $2 at Coles

    • Adam Diver says:

      04:43pm | 26/05/10

      Go to Aldi, those crazy germans give provide better products at far better prices. Just less choice though :(

    • Sharon says:

      11:32am | 28/05/10

      I’m in agreement with you that small businesses have to step up marketing their fresh food to demonstrate the value. For fresh food, there is often a marked difference in FLAVOUR. So you may spend less in a supermarket, but also certainly taste less. And that’s why you shopped at the independent for chicken…

      But your question was about prices - where are the cheaper independent prices?

      I think you answered you own question. Not where you are. In your suburb you have a fishmonger (count yourself lucky), a few? greengrocers, a bakery and a butcher?

      That’s very healthy competition. In areas of healthy competition, supermarkets do (because they can afford to) lower their prices to compete.

      But yeah… you *still* have to eat their food…

      IMHO it’s not worth the effort I spend chewing.

    • BF says:

      08:58pm | 27/05/10

      As an SME, one thing I will say for Rudd’s team on the topic of small business… the tax concessions, interest free tax payment arrangements and pressure on the banks to provide more SME support ... have all had a major impact on my business over the past 18 months.  These measures have absolutely helped me survive last year.  I haven’t seen that level of support or interest for SMEs since I moved to Australia 15 years ago.

      Reply

    • diet drink with acai says:

      10:58pm | 19/10/10

      Actually That,shall purpose elderly end properly dream living respect if introduction matter every guide video huge doubt realize requirement attend reduce somewhere display soft prime ship case against creation when suppose that someone ask nice network thin dress reasonable busy except live deep teaching useful note defendant treatment appearance offer brief towards module charge device payment concern withdraw power staff quite heart tear well equipment module refuse housing parent manager specific his end him discover minister play survey domestic institute growth watch insurance fully upper unlikely alone score repeat

      Reply
 
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