It is 19 minutes after 8’oclock and as I said earlier there is some justice for supermarket suppliers.
Last September Coles instituted its own supplier charter which it said would correct the power imbalance between it and its suppliers.
It appointed former Victorian Premier Jeff Kennett as independent arbitrator of disputes. Mr Kennett has now made good on that appointment, by ordering Coles to pay $12.3 million to 200 suppliers who Coles forced to pay excessive so called rebates. Future rebates will also be reduced, and Coles will allow some suppliers to opt-out of them all together.
These rebates, they are a real money spinner for Coles. They require suppliers to pay 1% of their earnings from sales of their products in Coles stores to Coles.
Coles also charges its suppliers profit gap and waste payments. Now the profit gap is the gap between actual sales of products in Coles stores and sales targets set by Coles.
Waste charges are the difference between the original retail price of a deleted product and its discounted price once Coles has decided to delete it and sell it quickly.
It’s unbelievable isn’t it? Mr Kennett’s direction to Coles to pay suppliers $12.3 million comes on top of the $10 million the Federal Court ordered Coles to pay suppliers for unconscionable conduct last December.
As I said earlier, this is a victory for supermarket supplier but no thanks to the government. Whose best shot at bringing the supermarket giants into line is a voluntary supermarket code of conduct. On the plus-side in relation to that we are told Coles has now signed up to the code.
I tell you what, they get away with blue murder don’t they, some of these supermarket giants.
Bruce Billson is the Small Business Minister; he is on the line right now. Minister good morning to you.
Good Morning to you Chris and your listeners.
To the supermarkets in a second, but since today is the 1st of July, small business is getting a tax cut, I think it’s worth telling most of our audience about that because it would probably pertain to many many small businesses.
Yes it is an exciting day - these measures were a part of the largest small business boost in any Budget in our nation’s history Chris, and we know about the instant asset write-off that started from Budget night; that is continuing into this financial year.
But we are also seeing the small business company tax rate come down to the lowest it has been in almost 50 years as an incentive and encouragement for those courageous enterprising men and women that create jobs and economic opportunity.
But we haven’t forgotten about tradies, Tony’s tradies if you will- those businesses that aren’t incorporated, there is also a discount on their tax liability.
We have also fixed problems on employee share schemes that Labor introduced and made a real mess off back in 2009.
So lots of good things, changes to the Job Active network, new support for apprenticeships, good day for small business and just more to come though Chris.
The council of small business organisations have welcomed the cut but say more needs to be done they are talking about areas like contract processes and competition legislation. Any joy in those fields?
Yeah there is, we got the unfair contract terms protections bill in the parliament now.
That is basically an extension of protections consumers can access. My view and the Coalition’s views always been that a number of small businesses don’t have any more market power then you or me as individuals yet they couldn’t rely on these protections against unfair contract terms.
So you would get given this take it or leave it standard form contract and then be told that one party can cancel it and the other can’t.
Those sorts of things we are addressing as well.
Small Business and Family Enterprise Ombudsman- more to happen.
And in the competition space, if I can correct your intro slightly there Chris, the reason that Jeff Kennett was brought in to deal with Coles was because of successful litigation by the ACCC made possible by a funding boost for them; and the food and grocery code as Jeff Kennett acknowledged in the media today, is all about making sure that kind of appalling behaviour doesn’t happen again, so there is plenty happening in that space as well.
Well tell us about the supermarket code of conduct, what’s it designed to do?
Well it is designed to guard against the very kind of behaviour that you were describing,
You know these touch ups where the supermarkets would come along and say to a supplier ‘you want us to keep stocking your product or if you don’t want us to review the lines we buy from you, you need to throw in some money for a promotion, you need to pay a fee to be positioned on particular shelf space’.
All of those things were usually tried on after the original arrangement was entered into.
What we have said is suppliers deserve certainty, predictability and transparency.
Make sure there is a grocery supply agreement that outlines the terms and conditions.
Don’t try on these unilateral changes after the fact.
One that you left out Chris, which I find particularly appalling is that in some cases where stock was shoplifted from a retail outlet the supermarket chains would go and make the supplier pay for it, even though they were the ones in-control of the premises.
What a shocker.
Yes and this is what had to stop. And my instruction to the supermarket industry was, you work with the suppliers and come up with your best effort- and they did that, I still thought it had too many holes it, you could drive a truck through what they arrived at.
We have strengthened it particularly and have now got it enacted. The only voluntary decision a supermarket has available to it Chris is whether to agree to be bound by the code.
Once they make that decision to be bound by the code it is mandatory in its implication- that gives us a very clear eye into what is going on these supply chains.
Let us think about these poor suppliers- you are highly dependent on your contracts with these big supermarket chains and that can produce pretty ugly bargaining imbalances that led to the sort of conduct you were describing.
It has got to stop, it is not good for suppliers, that is why we have acted and now we have the first food and grocery code the country has seen.
A cynic such as myself might even suggest that it’s close enough to extortion as you can get but anyway- how will you police it or who will you police it?
Well the ACCC will police it. And the other thing too is which is important is where a supplier feels like they are aggrieved or that they feel like they have been done over or something that the supermarkets are doing is consistent with the undertakings in the code, then the ACCC can get involved, there are dispute resolution mechanisms.
That is important Chris because if you and I are a small business and we are in a legal dispute with a big business they can starve us out.
We run out of money and we don’t get our day of justice. So what these measures are designed to do is get those grievances elevated, dealt with, actioned quickly so people can get back to business- and then suppliers can invest with certainty and confidence in their product, in their service knowing they cannot have the rug pulled out from underneath them.
Just quickly while I have got you. You’re obviously watching the unfolding debt crisis in Greece.
Yep, very closely
What are your thoughts on the impact it may have, depending on what’s decided on over the weekend on Australian stock markets?
Yes the government is monitoring it quiet closely; I mean fortunately we have quite a limited direct exposure to the Greek economy.
We have strong banking institutions, we have got strength in our economy and the Australian Government has got a creditable for getting us back to surplus.
What is less clear is what might happen from the so called contagion effect if I can use that term; and you have touched on that. I mean there has been a bit of a bounce back in some stock markets yesterday, there is anticipation there will be a little bit of a hiccup today, but discussions are continuing. The Greek Government and the Greek people need to find some common ground with their creditors- because just like if you and I were borrowing money off people you cannot keep demanding more and more if you are not meeting reasonable terms for that financing. Those discussions are continuing
Ok thank you very much for your time this morning.
Good to talk Chris take care.
Federal Small Business Minister, Bruce Billson.