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Appearing as a witness in the Victorian Supreme Court can be embarrassing. The former CEO of the Australian Spar franchisor probably had to reveal more information than he preferred. But that is just a preliminary issue to greater consequences going far beyond the regulation of franchising. Milk War!
SPAR's former chief executive Leigh Carson agreed under cross-examination yesterday that SPAR was "on the brink of collapse" and not in a position to buy Franklins at the time of the Metcash proposal. Mr Carson said SPAR had, in fact, approached Franklins in the previous months to buy its business. The Australia
Obviously ‘on the brink of collapse’ took on new meaning when preparing Part 20 of Appendix 1 of the Franchising Code of Conduct’s mandatory Franchise Disclosure Document relating to solvency and during a strong period of new franchisees investing their capital in the Spar brand.
No doubt ASIC missed the ‘on the brink of collapse’ when assessing Spar’s completion of similar obligations requiring audited financial reports in Chapter 2M of the Corporations Act 2001.
Now here is where it really begins to get nauseating;
Mr Carson agreed under cross-examination that he considered major chains such as Woolworths and Coles to be competitors that had a "major effect" on SPAR in terms of the quality of service and prices it could charge its customers.
OK, so Spar is still hanging in there having difficulties but pretending not to when prospective franchisees are about. IGA franchisees cannot be fairing much better under the now exposed interpretation of this ‘market’ by the Australian Competition and Consumer Commission.
The ACCC has excluded Coles and Woolworths from its definition of ‘the market'.
Clearly the ACCC’s Graeme Samuel has decided on two levels of competition regulation for the same consumer dollar under the one Trade Practice Act 1974.
There appears to be no concern that when big business is given open slather small business, including franchisees, suffer in the short term and consumers and employees just take a little longer. This non-regulation has been festering since 2003 when the concept of distorted free markets came to maturity.
Over with Mr Xenophon at the Senate Inquiry into Milk, the issue is ‘milk wars’ between the food giants that essentially remove smaller wholesale and retail competition and logistics competitors while at the same time ‘consolidating’ primary producers off the farm and increasing leverage over the sector’s workforce.
The ACCC needs to explain to all of us why they were less than forthcoming in their evidence. We need to know whether Coles got a wink or a nod from the ACCC. SMH
The suggestion of an ACCC ‘wink or a nod’ in the same breath as Coles or Woolworths comes with convoluted history across many sectors.
The recent preview to the ‘milk wars’ was a short ‘bread war’ between Coles and Woolworths that especially did not have franchise chains like Brumbies and the troubled Bakers Delight franchisees applauding.
The Coles and Woolworths giants have a long history of pushing out many small business competitors either by price low-balling or by stealth where they are critical shopping centre tenants. Butchers and fruiterers received a shellacking while the ACCC didn’t notice.
Professor Frank Zumbo told the Senate Inquiry;
There is a common thread in the current problems we face with milk, groceries and banks. It's a failure by the ACCC to stop increasing consolidation of these markets before they become more concentrated. As they become more concentrated, these markets are characterised by oligopolies. What you see in milk is an example of that.
Moves by Coles and Woolworths to dominate a grocery/fuel consumer relationship through ‘fuel wars’ has further undermined independent and franchised fuel chains already under pressure from historically abusive big business fuel giants.
This particular ‘war' and acquisition takes on another dimension that makes the absurd simply more absurd with Metcash left out of the loop..
Third place getter is arguing to be allowed the same level of market manipulation as 1 and 2. Coles/Woollies have virtually been given a free pass to manipulate pricing to remove small business competitors and gain far greater control over consumers, labour markets and suppliers into the future. The losers are everyone except the big operators. Samuel's Competition
Chairman of the ACCC, Graeme Samuel, is reported to run a dictatorship. In only eight years of his ‘regulation’ of the Trade Practice Act he has delivered to Australian consumers a future that probably cannot be undone. There has been continual criticism in the media and within various Federal Inquiries and there have been accusations of impropriety - at least.
Franchisees have complained constantly of non-regulation of the franchising sector but it seems clear that Mr Samuel has sold the entire regulation of the Trade Practice Act, including the Franchising Code of Conduct, upstream, but to be fair: most probably under peer pressure.
Many in Australia have predicted Graeme Samuel will be replaced at the end of his tenure at the ACCC this year.