Questions are being asked as to whether the Wesfarmers-owned hardware giant Bunnings, who have a massive monopoly on hardware and horticulture sales and has recently moved into the kitchen and appliance markets, should be included in the Food and Grocery Code of Conduct.
Wesfarmers who at one time controlled Coles now face the real possibility that they could also face the same monopoly scrutiny as the two major supermarkets Woolworths and Coles now face fines that run into the billions of dollars if they fail to comply with a revamped and mandatory code of conduct designed to protect farmers and families.
An interim review of the Food and Grocery Code of Conduct was released on Monday and has the country’s big four supermarket retailers and wholesalers including Woolworths, Coles, Aldi and IGA in its cross hairs. The report sought to address the question of whether supermarkets were acting as monopolies and engaging in unfair practices. Craig Emerson who was heading up the report issued scathing remarks where he makes a case for the Code to become mandatory. “A heavy imbalance in market power between suppliers and supermarkets in Australia’s heavily concentrated supermarket industry necessitates an enforceable code of conduct. The existing Food and Grocery Code of Conduct is not effective.
“I firmly recommend the Code be made mandatory and apply to all supermarkets with annual revenues exceeding $5 billion, which at present are Coles, Woolworths and ALDI, and wholesaler, Metcash. Effective penalties must apply for breaches of the mandatory Code. This would bring the Australian Competition and Consumer Commissions (ACCC) into code enforcement. It would be able to seek penalties for major or systemic breaches of up to $10 million, 10 per cent of a supermarket’s annual turnover, or three times the benefit it gained from the breach, whichever is the greatest.”
The begging question now is what about the hardware space where Bunnings dominates?
Techtronic Brands, many sold at Bunnings
Last year the Federal Court imposed a $15 million penalty on Techtronic who sell Milwaukee, Ryobi products at Bunnings for engaging in resale price maintenance conduct in relation to a range of power tools, hand tools, and accessory products.
This penalty stands as the highest ever imposed for resale price maintenance in Australia.
Bunnings, controls 70 per cent of the retail horticulture market, and this is just one of their many categories claims observers.
“By volume of units sold in their stores, plants are second only to tins of paint,” Greenlife Industry Australia said in its submission to the review of the food and grocery code being conducted by Dr Emerson, a former Labor minister and a columnist for The Australian Financial Review.
Code coverage of Bunnings would only cover its nursery division because that is the only area where it holds market-distorting power by being the only or main buyer to many suppliers across the country.
Dr Emerson concluded the case had not yet been made to expand the code to other retailers such as Bunnings, though he left the question open to more consultation, allowing Bunnings’ suppliers to argue the case.
Recently ChannelNews exposed the massive prices that Officeworks is charging for basics such as inks Vs what JB Hi Fi charge, this retailer is also owned by Wesfarmers.
He suggested Bunnings and its suppliers work together to form a voluntary code of conduct or similar document that gives suppliers similar standing as those covered by the compulsory code.
“The final report of this review will consider this specific issue further,” he said. That final report is due to be handed to the government on June 30.
