Supermarket giants found to be overcharging customers could face criminal penalties if the government adopts the findings of a scathing new review.
A Senate committee tasked to investigate supermarket pricing practices released its final findings on Tuesday.
The report, which backs proposed divestiture laws to break up supermarket chains found to be abusing their market power, found Australia’s grocery industry was one “driven by profits at the expense of consumers” and called to enact stronger laws to protect consumers.
“The evidence brought forward by people willing to speak out about the business practices of Coles and Woolworths suggests that maintaining margins and increasing margin growth is occurring at the expense of suppliers, consumers and best business practices, and without proper justification,” the report said.
“The committee therefore recommends that section 46 of the Competition and Consumer Act 2010 be amended to make it an offence to charge excessive prices, in terms similar to the European Union provisions.”
The probe also backed proposed reforms to force big companies to divest assets if their market power has been found to unfairly inflate prices and engage in anti-competitive behaviour.
It went against the recommendations of an interim review by economist and former Labor minister Craig Emerson, which rejected suggestions for break-up powers and instead proposed supermarkets and suppliers follow a mandatory code of conduct backed by stiff penalties
Prime Minister Anthony Albanese rubbished suggestions for divestiture laws in February, telling reporters that Australia was not “the old Soviet Union.”
The Senate report noted that a majority of inquiry participants advised that divestiture powers would be an important “final step” in competition regulation, to be drawn upon when all else fails.
“The committee was also told that having divestiture powers in the face of proven abuses of market power would have a ‘big stick’ impact of ensuring that supermarkets take regulation more seriously,” the report said.
“Divestiture would be a valuable option in the arsenal available to government to ensure that supermarket economic activity remains on an appropriately level playing field, to the benefit of all within the Australian economy.”
The Greens have introduced a bill to parliament to create powers to force Coles and Woolworths to sell parts of their business.
Both Woolworths and Coles have opposed the idea of break-up laws due to the risk of “unintended consequences” but have supported an overhaul of the grocery code of conduct.
Woolworths, Coles and Aldi, along with the wholesaler Metcash, have a collective market share of 80 per cent of Australia’s grocery market.
During public hearings, farmers’ groups alleged supermarkets were raking in excessive profits by marking down prices on in-store products and offering farmers less for the same item.
It also heard evidence that some farmers were receiving prices for their produce from Coles and Woolworths that hadn’t changed in more than 10 years.
The federal probe has been one of multiple inquiries investigating Australia’s grocery sector amid concerns over high grocery prices and rising cost-of-living.