Senate inquiry recommends powers to forcibly break up supermarkets and imposition of mandatory code of conduct

Coles and Woolworths’ treatment of suppliers and customers has been under scrutiny. (ABC News)

The first of six inquiries sparked by the cost-of-living crisis has backed calls for the major supermarkets to be slapped with hefty fines if they are found to have mistreated suppliers.

But the Greens-led Senate inquiry — examining the gulf between prices paid at the farmgate and the check-out — has been unable to agree on the more contentious issue of whether to allow the federal court to break up supermarket monopolies.

Committee chair and Greens senator Nick McKim, who has also introduced a bill in the Senate to create break-up powers, said the report proposed concrete steps to tackle the price of food and supermarket “profiteering”.

“We’ve heard from farmers and suppliers about how the massive market power of Coles and Woolworths is allowing them to act unconscionably,” he said.

“But without the ability to break up the duopoly, our market will remain skewed towards the interests of a few powerful players and nothing will change.”

Senators fail to find agreement

Labor has repeatedly ruled out the introduction of divestiture powers. And while the Coalition stated it was “not opposed to the principle of divestiture” — a nod to the Nationals who called for them — its senators rejected the Greens’ recommendation in their dissenting report.

Among the 14 recommendations was a call to make price gouging illegal, bolster the powers of the Australian Competition and Consumer Commission (ACCC) to investigate unfair trading, and establish a prices and competition commission to examine and monitor prices.

However with three dissenting reports, the only substantial recommendation that attracted the support of the whole committee was to make the guidelines that regulate the relationship between suppliers and Australia’s supermarket chains mandatory.

The committee called for “substantial penalties for breaches” and for the code to be extended to cover retailers of “greenlife” products — or plants — which would capture Bunnings.

That call is broadly in line with the interim recommendation of former cabinet minister Craig Emerson in a separate inquiry into the Food and Grocery Code of Conduct, suggesting broad support for the change.

Supermarkets developed the voluntary code in 2015 in response to public anger about their treatment of suppliers. However, there are no penalties for breaches.

Dr Emerson, whose final report is due at the end of June, suggested a mandatory code could include penalties as high as 10 per cent of a company’s annual revenue.

Inquiry heard ‘troubling testimony’ from suppliers

Australia has a highly concentrated supermarket sector, with Coles and Woolworths accounting for two-thirds of the market, giving them significant leverage over suppliers who have long complained they are being squeezed on prices.

National Farmers Federation Horticulture Council’s Jolyon Burnett said the committee’s report was part of a growing base of evidence painting supermarkets and Bunnings “in the same light as the big four banks following the banking royal commission”.

Mr Burnett urged the government to act on the code of conduct but added: “It will all be for nothing if the ACCC isn’t appropriately empowered and resourced to act as a tough cop on the beat.”

“The select committee has today reported on troubling testimony from growers, of predatory pricing practices that exploit the perishable nature of fresh produce, the imposition on growers of costs and risks outside their control, and of an almost universal fear of commercial retribution should any objections be raised,” she said.

“Not only are growers getting a raw deal with every trade, they’re also left with little profit to reinvest in the productivity of their businesses.”

Earlier, Treasurer Jim Chalmers talked up the steps the government was already taking to “make our supermarket sector more competitive”, including a beefed-up code of conduct and merger reform.

“We want a fair go for families and farmers,” he said.

“We know that it’s at the check-out where some of these cost of living pressures are most acutely, most harshly felt.”

The Senate committee questioned the bosses of Australia’s big four grocery companies — Woolworths, Coles, Aldi and Metcash — and at one point, threatened outgoing Woolworths boss Brad Banducci with contempt, which carries a penalty of six months in jail, for refusing to provide information about the company’s profits.

In a chapter entitled “Mr Brad Banducci”, the committee confirmed it received the information it was chasing after Mr Banducci’s appearance before the committee and was “therefore not minded to pursue the matter”.