The supermarket giants continue to squeeze small business

Eight months ago I wrote about this predominately to raise awareness about the plight of newsagents and the two major supermarkets looking to take more market share from them. To recap, in 2010 the Australian Labor Party (ALP) sold and privatised the New South Wales (NSW) lotteries to the Tatts Group (Tatts), a condition of privatising it was a five year moratorium that prevented Coles and Woolworth’s from selling lottery tickets and scratch tickets. The moratorium rule was also meant to include meetings between Tatts, NANA (The Newsagents Association of NSW and the Australian Capital Territory) and the NSW state government every six months, this did not happen. Mediation with Tatts and NANA last November also produced no results. The moratorium was due to end on March the 31st this year and there was grave concern in the industry that as of April 1st 2015, Tatts could sell to any retailer that it chooses.

The timing was right before the NSW election and the ALP opposition leader, Luke Foley attempted to make it an election issue with the Liberal National Party (LNP) Premier, Mike Baird. Mr Foley announced as an election promise on January 20th that an ALP government would extend protections for newsagents to preserve the industry. The NSW Treasurer, Andrew Constance, promptly came back with modelling showing that maintaining the exclusivity, could cost the government $760 million in forgone revenue by 2050 when the contract ends. On Thursday January 29th Mr Constance, sat down with Tatts chief executive Robbie Cooke, and signed a memorandum of understanding (MOU). The understanding being that for newsagents and convenience stores, Coles and Woolworth’s would not be able sell lottery products in their supermarkets until 2018.

NANA chief executive, Andrew Packham, questioned the deal and said that he was “astounded” the government would sign an agreement when his association was still in negotiations about the moratorium with Tatts. The industry was also due to meet with Mr Baird to discuss it the following Monday. Mr Packham also said that the MOU was of limited value because it didn’t include retail fuel outlets also owned by the big two supermarkets.

Last month Tatts announced that it had entered into franchise agreements with Woolworth’s petrol stations in NSW and the Australian Capital Territory (ACT) to sell its full range of lottery products. The arrangement includes five Woolworth’s petrol stations in the ACT, twenty-four in NSW and twenty-five outlets in Victoria. ACT Gaming minister, Joy Burch understands that Tatts informed the ACT Gambling and Racing Commission (AGRC) of its decision only shortly before the announcement. “This news has come as a surprise to me, so I can fully understand the shock and confusion being felt by so many in our small business community.” Ms Burch asked the AGRC to urgently investigate the government’s options and said that they would look at details of the deal to determine their approach. “As racing and gaming minister, I am concerned about the impact that opening up sales of gambling products like scratchies to 24/7 outlets may have on existing harm minimisation measures.”

Upon the AGRC recommendations, stores will only be allowed to sell lottery products between five am and nine pm. Ms Burch said “These new hours will ensure the current access to purchase these products will remain, but will not allow sale at all hours of the night,” and that “I was concerned that lottery products were going to be available 24 hours a day, seven days a week. I believe the community would consider this to be inappropriate, as no other gambling product in the ACT is available through retail shops at all hours of the night.”

NANA is justifiably worried as to what this means for small business, they sent a letter to Tatts outlining their concerns. They also made it known that they were aware that negotiations between Woolworths Petrol must’ve been ongoing even before they had to sign the new agreement this year. The Australian Newsagents Federation (ANF) ACT director Alan MacDonald, has been working together with NANA and the ACT opposition to table legislation next week on the 16th September to limit lottery sales to small businesses in the ACT. The next day the member for Tamworth, Kevin Anderson and Minister for Small Business, John Barilaro on behalf of NANA, will present a 125,000 signature petition to the NSW Parliament Legislative Assembly for debate.

The ANF has also joined an alliance of other small business groups representing two million small retailers, expressing dismay over the federal government’s decision last week to defer competition reforms. These reforms were the recommendations of the government’s Harper review into competition policy. The proposed changes are to section 46 of the Competition and Consumer Act requiring a small business to prove that the action of a bigger business had the “effect” of substantially lessening competition, instead of being required to prove that the action had been done with that “purpose”. It would also remove a section forbidding a big business from “taking advantage” of its market power.

Companies including Telstra, Bluescope, and Qantas have joined Coles and Woolworths, as well as Wesfarmers and the Business Council of Australia (BCA) in a major lobbying group campaigning against it. The BCA believes that the effects test proposal would be damaging to competition and the Australian economy: “Small business needs to understand they will not be quarantined from the impact of this change which will apply equally to all business, for example, in regional towns or markets where a small business’s product or service is dominant,” the BCA statement also said that “In these circumstances, small businesses, could be the instigator of actions against other small businesses, who would bear the unintended consequences of additional cost and uncertainty.”

The Small Business minister, Bruce Billson, was understood to have the support of at least six back benchers but not the support of cabinet colleagues Treasurer Joe Hockey, Attorney General George Brandis, Trade minister Andrew Robb, Finance minister Mathias Cormann and Communications minister Malcolm Turnbull. Mr Billson has said that: ‘he won’t shy away from continuing to advocate for section 46 of the Competition Act to be amended, saying SMEs (Small to Medium Enterprises) are disadvantaged under the current application of the law.’

Today on average, every Australian man, woman and child spends $100 a week on food, merchandise, liquor, hardware or petrol at Wesfarmers/Coles or Woolworth’s outlets. Mr Robb said in August 2013 that: “We are an oligopoly community. We shouldn’t fight it.” How that sentiment encourages true competition I don’t know, but it does fly in the face of Mr Billson’s attempts to protect small business from big business abusing its market power. What is also of interest is that Mr Baird’s father, former Liberal minister, Bruce Baird chaired an inquiry into the retail sector in 1999. He described it as “heavily concentrated and oligopolistic in nature” and he expressed concern about predatory pricing and unconscionable market conduct. Out of 332 submissions to the inquiry, 285 were against the increasing power of the big two supermarkets. The 1999 Baird Report from the House of Representatives inquiry cautiously recommends an increase in the Australian Competition and Consumer Commision (ACCC) powers to regulate “unconscionable conduct”.

The big two supermarkets have too much power, by giving them a share of the lottery market even in petrol stations is acquiescing. There is no room for competition let alone for small business with the big two having a monopoly and having the power and money to lobby the government. It’s time that the Government of today or tomorrow addresses this urgently without fear or favour.

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