The argument over the possible break-up of Coles and Woolworths, as proposed by the Greens and backed by the Nationals (the latter on the basis they’d prefer farmers to overcharge consumers, not the supermarkets) is at the idiot fringe of a much bigger discussion to be had about our economy. That is: how invested are we in the power of large corporations to use their oligopolistic position to rip us off, and how much do we stand to lose if we establish break-up powers to impose competition where little currently exists?
In the first place, the focus on Coles and Woolies is misleading. There are two other supermarket chains: Metcash, which supplies and sponsors the IGA chain of independents, and the German giant Aldi. Woolies had annual sales in 2022-23 of $48 billion in its Australian supermarkets and food business, Coles had $40.5 billion, Metcash had around $9.7 billion through supermarkets and food, and Aldi, a private company, is estimated at around $12 billion. In other words, out of the roughly $110 billion in revenue, nearly 20% goes to Aldi and Metcash — but both have been conspicuous absentees from the discussion about price gouging and breaking up supermarket chains.
Nor does the bill proposed by the Greens address a key problem in supermarket price gouging: the role of multinational suppliers in deliberately pushing up prices to increase profits (the reverse of the farmer problem).
Let’s pull out even further: price gouging and lack of competition is of course not merely a supermarket problem but one that’s endemic across the economy. And divestiture powers are part of the solution, along with much tougher competition laws and better regulation. Prime Minister Albanese has wilfully mischaracterised divestiture powers as representative of “a command and control economy”, insisting “we’re not the old Soviet Union”. Divestiture powers, he said, amounted to “walk[ing] into Woolworths and Coles, which is a concentration of power, and say ‘you’re going to shut your business here'”.
That’s patently false, as Albanese surely knows. Divestiture powers are about forcing the divestment of assets, not destroying them. The Soviet Union quip is rubbish — the United States has had federal divestiture powers for well over a century, with the first power to break up trusts passing Congress in 1890. The Sherman Antitrust Act was crucial in President Teddy Roosevelt (a Republican), having grown tired of trying to regulate giant corporations, initiating trust-busting actions that would break up the likes of Standard Oil in 1911. The European Union also has a divestiture power for when companies abuse market power.
Why a one-time left-wing firebrand should not merely reject such basic tools of capitalist regulation but purposefully misrepresent them is a mystery, but perhaps the prime minister has a broader view of the economy than one focused merely on competition. Perhaps he’s thinking of who would be affected if we started breaking up companies that have exploited their market power to gouge consumers: superannuation funds and, therefore, consumers and workers.
Super funds are estimated to own around 38% of the Australian sharemarket (industry super funds holding up to 15-18%), most of which is concentrated in the top end of the ASX 200. That means our biggest funds like AustralianSuper, Hostplus, Aware, Just and Cbus are, along with the big retail funds, and foreign investment funds, on the share registers of big firms that have engaged in often egregious price gouging. So far, they’ve declined to use their ownership role to discourage corporations from abusing their market power to price gouge their own members.
Those funds are charged with operating in the best interests of their members. But what’s the best interest of a typical working member of a large industry super fund? The slightly higher retirement income they’ll enjoy courtesy of higher profits from large corporations abusing their power, or the lower prices and lower inflation they’ll enjoy if the Australian government got serious about competition? Good luck working that one out.
As a result of our superannuation system, workers are both victims and beneficiaries of the gouging behaviour of large corporations (taxpayers also benefit from higher company tax paid by more profitable companies) — a complication that hasn’t received any attention in the course of the railing against Coles and Woolworths. Perhaps large super funds can become more activist in reining in the abuse of market power of the companies they own so much of?
False dichotomy, from the errneous assumption that breaking up a monopolistic corporation to increase competition must be bad for shareholders. The greatest example is the one Keane cites: Standard Oil, the colossal monopoly oil corporation created by John D Rockefeller that was split up just before the Great War. The overall value of the resulting companies — Exxon, Chevron, Mobil, Texaco etc. — soon exceeded the value of Standard Oil. From an objective capitalistic point of view the break up of Standard Oil resulted in greatly increased economic activity and wealth, to the benefit of shareholders. It is not obvious why Keane thinks pension funds invested in our supermarket giants, and the tax taken from the supermarket sector, must suffer if those companies were broken up.
Beat me to it and fascinating history (see ‘The Prize’ on big oil); related calls for (re)nationalisation e.g. bad companies that may then need taxpayers bailouts or subsidies such as airlines, coal fired power stations, nuclear etc. and those with the ear of governments.
Yes, Yergin’s book is an extraordinary work.
Yep, and it also resonates on the how the fossil fuel faux ‘free market’ oligarchs, nowadays Koch Network whose Tufton St. London supported Brexit vs EU, The Voice No campaign via CIS/IPA, ‘own’ Trump’s GOP and seemingly comfortable with Putin’s invasion of western & EU facing Ukraine (especially via Russian ally Hungary & Abbott’s new workplace linked to Koch’s Heritage).
They don’t like the EU’s sensible regulation or minimum standards on finance/taxes, competition, fossil fuels/environment, labour, consumers etc.
Yeh, a lot of good points but a false equivalence in that oil and gas boomed in the 100 years or so since then where I’d say the business model would have outgrown food many times over due to the huge uptake in motor vehicles regardless of population growth. The grocery market has a much slower increase in it’s ability to “grow” or increase profit and is tied to population growth which will hopefully slow down here.
Sure, the nascent oil industry is very different to retailing groceries. The point I was making is that the capitalism we are supposed to benefit from requires no restriction on competition; because breaking up monopolies, or duopolies, or any cartels that stifle competition, is fundamentally good for healthy capitalism. But it’s anathema to those who prefer to exploit their market power to prevent competition, and they are the ones in control. The big joke is the way the monopolists, rentiers and crony capitalists insist they are doing it for ‘free market’ or capitalist reasons, and any interference with their snout-in-the-trough antics is ‘socialism’ or ‘communism’.
. Upholding this status quo is the role of right wing legacy media, there is no competition or appetite for unearthing your example due to the government’s lack of acknowledgement of political/ business interests in media .Thanks for pointing out what actually happened when the monopoly was broken up.
It’s the same zero-sum mentality which prevails amongst the stupidly greedy.
Somehow it isn’t obvious that suffocating 90% of us is choking off a vast amount of potential.
It struck me as a shallow argument. As in, they’re ripping me off to benefit someone else, so it’s OK. I’ve shopped mainly at Woolworths for 45 years and since covid their pricing policy has gone haywire. Now I try to bulk buy when my items are 50% off (!). Their checkout security has been boosted as, I presume, more people have lost respect for being ripped off and now pay what they have to and steal what they can. A bit like Eastern Europe under the Russians. Basic crumbling of the rule of law.
But the Govt is a duopoly which they closely guard; ref the Democrats, now the Greens. So that’s the thing to change before the rest (banks etc) can ever follow. 90% of people vote with their lizard brain, imo.
Let’s face it, while making it imperative to steal from them they also made it possible, with the self-checkout. Then so much stock disappears they have to raise prices and sack more workers. And then fork out on security. Not to mention getting everyone to hate them. All while having to maintain profits, share price and dividends. A few years ago Woollies tried to grab some Bunnings market share and got their fingers burnt, gotta laugh, then later with Chemists the same. Maybe they should have a go at banking. Joke.
BHP has the same mentality. But at least they have so much money they can afford to pile the entire project into a big hole and bury it. (Buildings, furniture, computers, the lot.) Aren’t tax write-offs great.
Aren’t they doing face recognition on the sly?
Their dilemma is this: should we call security and hire lawyers for court appearances and lose this customer for the rest of his life? Which equates to all customers when they’re all pilfering… Eventually they will see the light, reinstate all the checkout chicks and ditch the self checkouts. Maybe even bring back the handy plastic bags.
Or they may bring in smart trolleys which keep a running total of what you put in. Good luck with that one Woollies! Hah!
It is an interesting dilemma, super v’s pricing. However I think the article neglects the disparity in how much we have in super. Its very disproportionately high income, and men. Whereas everyone pays for the extortion, so this is just exacerbating inequality. Even the unwaged have to try and eat!
Perhaps, if mr. Albanese’s only concern really is for the prosperity of the workers and consumers, he might have rebutted the Green’s proposal by talking about those issues instead of his ‘hurr communism hurr’ comments? I’m not an economist or a PR person but I think that that might be a more compelling argument for most (non LNP) voters than making an inane remark about the soviet union.
I really don’t think that Albanese was thinking about the wellbeing of the less privileged, or he’d have led with that argument.
Seems blatantly obvious that he’s sucking up to the BCA/IPA/Limited News axis of evil; auditioning for the ruling class lapdog spot now that the LNP has rabies.
Aussie Super has how much funds under management? $300b? I forget.
Industry super funds should be WAY more directly involved in the provision of services. They could divest from WOW and COL and set up their own supermarket, give super funds members a discount, pay suppliers properly, give back to the community.
CBUS should be setting up trades schools across the country, they should be setting up pre fab factories across the country, why aren’t they?
I want to know why people with ideas like yours never have a seat at the table.
Moral hazard, is there any intention of asking fund members?
What if, after investing in these sectors they lost members’ funds from members’ own contributions; excuse to hollow out and decrease govt. budgets and service delivery by having retirees back risky business investments?
I can’t help but feel everybody is rushing to judgment. The duopoly is not totally without competition, particularly from Aldi. But a lot of the suppliers are. I don’t mean farmers, I mean food processors whose products have increased in price by 80%. Let’s notionally pull apart the entire operation before deciding who is at fault.
Perhaps the business model needs to change, and operate more like Costco, who sell retail products that they don’t actually buy. Farmers cooperatives could sell their food directly to consumers in a supermarket, and pay a percentage of their profits to the company that manages the store and pays the staff that stock the shelves/ fruit and vegetable bins. Seems we all have to do our own check out now anyways.
“cooperatives”
BURN THE WITCH!
But she’s our witch! So cut her loose (sorry! Felt a Firefly reference would fit well here…)
Agree, we just get served up headlines and talking points, but broad and grounded analysis?
but NO broad and grounded analysis?
That would be the suppliers who call Australia “Treasure Island”? You’ll find them all over the economy, apparently- not just in the supermarket and/or liquor trade. Somebody’s got to subsidise expansion into Asian markets and it seems Australians are those somebodies.