No. 154

“UP, UP PRICES ARE UP”

 BRUCE SPRINGSTEEN EXPLAINS WHY NOBODY SPEAKS UP FOR SUPERMARKETS

STONE the crows! Is the government seeking solutions from Springsteen, again?

Close students of rock ‘n’ roll rhetoric will remember last August when the Treasurer approvingly endorsed Bruce Springsteen’s pop populism.[i] Well, now, it could be that the PM’s adviser Malcolm Tucker, (unless I mean John McTernan) is seeking survival by way of Bruce Springsteen’s lyrics, in particular that undying classic, “Queen of the Supermarket”, namely:

          With my shopping cart I move through the heart

  Of a sea of fools so blissfully unaware

 That they’re in the presence of something wonderful [ii]

What’s wonderful? Why, the outrageously low prices supermarket chains charge for groceries. The PM now sees credible reason to stick her bib in, with talk of codes of conduct.[iii]

Yes, you heard the Crows cawing correctly; there is criticism of competition everywhere, from farm to checkout, that means people can be fed for less.[iv]

But why attack the interests of modern families (“working families” presumably a phrase too Kevin 07 for Julia XIII)?

Here’s a hint:

 The government is planning a crackdown on big supermarkets to help Australian grocery suppliers in a move that acts on some of the independents’ concerns and could smooth the ground for media legislation to be introduced into parliament today. [v]

 And another: 

 If we spent public money on creating alternative retail spaces and developing affordable ways to make tasty, fresh, sustainable food then there would be some true competition for Coles and Woolworths. Instead of asking the ACCC to occasionally thump the duopolists, let’s try to imagine how to nurture thriving small-scale social enterprise to build healthier local relationships between us and our food. Then we can figure out what we need to do to make sure that Coles and Woolworths don’t undermine creative alternatives.” [vi]

(Good thinking, we could have a national food authority supplying us with academically approved food – called, um, what about “rations”.)

And then there’s Bob Katter’s praise for the Australian Competition and Consumer Commission’s announcement, in 2012, of an inquiry into “the supermarket giants using their stronghold [sic] on the market to drive down the price they pay to farmers for produce.”[vii]

But who cares about working family moderns (do I have that right?) who shop in supermarkets and quite like low prices? Who indeed? It seems they run a distant third in the government’s “appease the base, or at least shut up those who complain the most” strategy leading up to the election.

And Mr Tucker, (unless I mean McTernan) need not worry about a sharp response from the conservatives, some of whom also appear ambivalent about who needs help most – families, be they working or modern, or food producers and manufacturers.

In an excellent example of having his home brand cake and eating it too, Liberal small business spokesman Bruce Billson said last year:

The community is faced with cost of living pressures from every angle but all the Gillard Government is willing to do is handball its responsibility. … the Gillard Government has rightly raised the issue of how the supermarket chains are using their home brands to erode brand loyalty and to force suppliers to operate on extremely thin margins[viii]

And Joe Hockey appears to hope that hinting at the possibility of a discussion in very general terms about whether there is a need for a debate on supermarket power is all he need do for the moment:

 We will review competition policy to ensure that large and small businesses are competing on a genuinely level playing field. And I particularly want to recognise the significance of recent comments by Terry Davis the Group Managing Director of Coca Cola Amatil who recognised as a major supplier to Coles and Woolworths, that a structural imbalance exists between the major supermarkets and suppliers and that there is a need for a national debate. [ix]

 Good to see the Libs sticking up for small businesses like Coca Cola.

Another reason why defending the interests of everybody but supermarket shoppers is smart politics is that price reviews are as difficult as they are often pointless. Connoisseurs of plans gone bad will remember Treasurer Wayne Swan’s “Grocery Watch”. It didn’t work for all sorts of reasons.

For a start what looks great in opposition is rarely as attractive the morning after the election night party. Once in government, Labor decided that for Canberra to keep an eye on the cost of premium versus home brand milk was not the best use of bureaucrats’ time and so they hospital passed the job to Choice. But then the supermarkets said (what a surprise) they did not want to hand over their price data systems and Consumer Affairs minister Craig Emerson, sensibly, shut down the show[x]

So now the government is doing something much more straightforward – beating up capitalists for doing what capitalists do – building market share and maximising product by giving people what they want. And it’s reverting to the great bipartisan tradition of protecting whoever laments loudest at the expense of consumers who suffer “down down, prices are down”, in silence. This is not to deny that Coles and Woolworths use their enormous market share to keep suppliers lean and hungry.[xi]

But remember the milk wars, when producers complained supermarkets were cutting retail prices at dairy farmers’ expense and creaming (sorry) profits from extra sales.

I bet a lot more people remember that than what the ACCC actually discovered:

 The major impact of the reduction in milk prices since January seems to have been a reduction in the supermarkets’ profit margins on house brand milk. … Coles’ purpose in reducing the price of its house brand milk was to increase its market share by taking sales from its supermarket competitors … As to the relationship between dairy farmers and milk processors, it is the case that some processors pay some farmers a lower farm gate price for milk sold as supermarket house brand milk.  However on the evidence we’ve gathered over the last 6 months it seems most milk processors pay the same farm gate price to dairy farmers irrespective of whether it is intended to be sold as branded or house brand milk. [xii]

Of course Coles and Woolworths could decide to act like an oligopoly, if the ACCC decided to ignore the bit about competition in its title. They might even get away with it, at least for as long as it takes consumers to spell out a-l-d-i.

But don’t expect anybody to explain this is how markets work. Not now, when populist politics is all about protectionism.

Just as the government has received Pauline Hanson’s blessing for warning that foreigners are taking our jobs, so there are populist plaudits for talk of regulation to save agriculture from the supermarkets:[xiii] I am delighted that the ACCC is looking at these questions of the uncompetitive practices… and where they’re really screwing down the suppliers in terms of what they get as return,” Simon Crean (wearing his regional ministry hat) said last month.[xiv]

So now it’s back to the 1990s, when from dairy quotas to egg production allowances, all sorts of agriculture was regulated by the states to protect licensed producers from competition.

Even today, and the Crows are not making this up, a Western Australia government agency is “responsible for managing the supply of fresh table potatoes in Western Australia” [xv]

The old planned rural economy was great for everybody who owned a quota but appalling for efficient farmers who didn’t and for consumers who had to take what they were given at effectively regulated prices.

National Competition Policy ended most of this with all states stopping price and supply controls on milk; Queensland ended its export marketing monopoly on barley, WA and Tasmania freed up their egg markets. All states established free markets in chooks.[xvi]

The losers, especially dairy farmers everywhere but Victoria (which was already building an export base back then), were outraged. Many producers still are. But now it’s the supermarkets not the NCP that upsets them. As a post on the website of influential dairy activist, “Milkmaid Marian” puts it: 

 Stop and think what you are doing Colesworths. You have taken a very blunt axe to the Australian dairy supply chain. In our view you are definitely in denial if you think that you and your shareholders have no responsibility for the long-term social health and economic wealth of Australian agriculture.[xvii]

 But evidently no responsibility to consumers who benefit from low supermarket prices and whom everybody, who wants the supermarkets to pay them more, ignores.

And nobody will stand up for all of us in the checkout queue.

As Bruce Springsteen explains – “Each night I take my groceries and I drift away.”[xviii]

So why should anybody pay attention to people who don’t complain about demands to change the jingle to “up, up prices are up.”?

ENDNOTES