December 4th 2004

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Articles from this issue:

COVER STORY: The rise of Condoleezza Rice

EDITORIAL: Corporate power ... and the public interest

CANBERRA OBSERVED: Talent gap widens between major parties

CENSORSHIP: Nicole Kidman in controversial movie

ECONOMICS: Productivity report driven by ideology

FINANCE: Day of reckoning for Australia's debt binge?

RURAL AFFAIRS: The National Party's Telstra sale dilemma

NUCLEAR PROLIFERATION PART 1: Iran backs down on uranium enrichment

NUCLEAR PROLIFERATION PART 2: US doubtful about Tehran's intentions

VIET TAN: New reform party launched for Vietnam

STRAWS IN THE WIND: Uncharted territory / The Zamindars / Labor's performance / The Light on the Hill

SEX EDUCATION: Telling teens the truth - 'cool' virginity, abstinence and faithful marriage

US ELECTIONS: Christians eat lions in 2004 election

China's stand-off with Taiwan (letter)

Labor needs heart transplant (letter)

Saddam's secret weapons (letter)

BOOKS: MONASH: The outsider who won a war, by Roland Perry

THE CRISIS OF ISLAM: Holy War and Unholy Terror, by Bernard Lewis

BOOKS: Non-Alignment and Peace versus Military Alignment and War

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Corporate power ... and the public interest

by Peter Westmore

News Weekly, December 4, 2004
The Australian Competition and Consumer Commission's recent conference, Cracking Cartels: International and Australian Developments, is an occasion to draw attention to the fact that deregulation of the Australian economy has been accompanied by an increasing concentration of economic power in the hands of cartels in vital national industries.

The massive expansion of the two largest retail chains in Australia - Woolworths/Safeway and Coles - now gives them about an 80 per cent share of the Australian grocery market.

The proportion has doubled in the past 30 years, and now gives them a far larger share of the Australian consumer dollar than the largest chains in the United States, Japan or the UK.

The huge size of these companies, and the size of their supermarkets, gives consumers a greater choice than ever before. However, this outcome has been achieved at the expense of the supermarkets' suppliers, most obviously reflected in the declining farm-gate price of milk which has forced many off their farms.

The same thing is now happening to small petrol-retailers and liquor stores, as the large supermarket chains use their vast financial power to expand into these industries as well.

Rejecting suggestions by Sydney broadcaster, Alan Jones, that the supermarkets were indulging in unfair conduct, the Prime Minister gave listeners no reason to believe that he was concerned at the impact of the squeeze on independent petrol retailers.

Unfortunately, the Government's focus on ensuring competition and consumer protection has given little protection to small business competitors and the supermarkets' suppliers.

Anti-competitive conduct

Legal action by the ACCC failed to curb the power of the large supermarket chains several years ago, indicating that the law is urgently in need of amendment at this point, as ACCC chairman, Graeme Samuel, pointed out in a speech to the Food and Grocery Council of Australia in September 2003. Yet nothing has been done.

A similar problem exists on the waterfront, which is dominated by two large stevedores, Patricks and P&O Ports.

Mr Samuel recently highlighted the problem, when he said that it was more important to encourage competition and lower prices, than to shore up the "cosy duopoly" which exists on the waterfront.

He said, "According to the stevedores' own figures, they are enjoying returns on assets of around 27.8 per cent. These are well above international rates of return for comparable industries of seven to 17 per cent. These rates of return are a direct result of low levels of investment in expanded capacity."

He criticised Patrick Stevedoring's managing director, Chris Corrigan, who said , "It's easy to argue always more competition is better than less competition, but that's not necessarily the case", adding that more competition would cut "reasonable rates of return" for the two companies (Financial Review, October 28).

Mr Samuel said, "This is akin to arguing that Australia should return to an era of 'orderly marketing' where companies arrange industry affairs to their own benefit. Such a retrograde step would come at great cost to Australian consumers, exporters, importers and ultimately the Australian economy, with the benefits only accruing to the duopolies' shareholders."

Mr Corrigan rejected the criticism, at the same time announcing that Patrick's port operations had yielded a 34 per cent increase in profits, which pushed up the company's share price by 10 per cent.

Grave ethical and legal issues have been raised by the conduct of James Hardie, the company which for many years supplied asbestos sheeting to industry, causing the terrible diseases, asbestosis and mesothelioma.

Several years ago, the Australian company transferred its assets into James Hardie Industries NV, a Dutch-based company, establishing a separate foundation to pay the victims' medical expenses, but then leaving it deficient of funds to the extent of over $1 billion. Only after union demonstrations and council boycotts of James Hardie products were these issues taken seriously.

A NSW Government Commission of Inquiry into James Hardie recently found that the company's chief executive officer, Peter Macdonald, and other executives had potentially breached sections of the corporations law, and could face criminal charges.

In spite of this, the company's board agreed to pay Mr Macdonald $9 million as a separation payment.

Taken together, these three issues - the overwhelming power of the supermarket chains, the duopoly on the waterfront and the James Hardie case - raise questions that will not go away.

On the principle that governments are supposed to protect the weak and vulnerable from exploitation, existing laws need to be strengthened to protect the public and national interest, as a matter of urgency.

  • Peter Westmore is president of the National Civic Council.

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