This Bill arises as a result of recent difficulties experienced in the grocery trade. Senators will be aware that a boycott was placed earlier this year on the products of a certain company by a group representing wholesale and retail interests. Among the issues at the time was the question of retail sales of grocery goods below cost.
The boycott was a matter of some concern to me, as it was, indeed, to all parties in the trade. Accordingly, I asked the Examiner of Restrictive Practices, who has a monitoring function in this area, to intervene. Under his chairmanship it was agreed that boycott activity would cease, at least until the end of November this year, on the understanding that suppliers would, at the same time, withhold supplies from retailers who sold below cost.
It became clear during discussions that the issue ran deeper than the question of below-cost selling and, since the agreement was only temporary in nature and had implications for existing legislation in this area, the Restrictive Practices Commission became involved in further discussions with all interested parties. The commission, mindful of the fact that the underlying issue related to the whole question of the terms and conditions of supply and also that the independent negotiations on this question would require some time before an agreement could be concluded, first succeeded in arranging a further moratorium on boycott activity, to the end of March, 1979, and then turned their attention to the type of amending legislation required.
A situation in which manufacturers were, on the one hand, threatened by a boycott from one group of customers and, on the other, were having to give to another group the sort of terms that enabled them to indulge in below-cost selling, would, if it were to persist, most assuredly not be in the economic interests of the country. In the short-term perhaps it might serve to make certain products available at lower prices for some consumers—but this would be on a very limited scale. In the long-term it would almost certainly lead to the loss of jobs in manufacturing industry and the substitution of imported goods for the products of the firms which would have had to close. And concurrent with such adverse developments, that minority of consumers who had earlier benefited from below-cost selling would be likely to find themselves paying higher prices for their groceries.
Before proceeding further, I wish to refer briefly to the existing legal position. The first Restrictive Practices (Groceries) Order, made in 1956, provided, inter alia, that suppliers could withhold supplies of goods from a retailer if the latter resold at or below wholesale price and refused to give an undertaking that he would desist from doing so. The amending order made in 1973, however, repealed this provision in so far as it applied to grocery foodstuffs. One of the main considerations behind this amendment was the connection which was then seen to exist between advertising of below-cost sales and the practice of below-cost selling itself. Without widespread advertising, most of the impact of below-cost sales tended to be lost. The advertising of such sales had, moreover, other undesirable features notably that it served to give to the buying public a misleading impression of the entire range of prices being charged in the outlet or outlets concerned.
In reality, of course, the bulk of prices must reflect a margin which will both cover retailing cost and yield a profit, and advertising of this nature creates overall an unfavourable impression of the prices being charged in independent and small retail outlets, resulting in serious losses in sales. This automatically tends to facilitate the domination of the trade by multiple organisations. It was, therefore, considered that the prohibition of a practice which was seen to have a number of undesirable features would also have the effect of eliminating the actual practice of selling below purchase price. In their report to me, the commission recommended that the Restrictive Practices (Groceries) Orders should be amended to reapply, in relation to all grocery goods, the provision in the 1956 order enabling suppliers to withhold supplies from persons who engage in below cost selling. The commission also recommended that the prohibition on the advertising for sale of goods below cost should be restated so as to apply this prohibition to the advertising of all grocery goods.
I have accepted the commission's recommendations and an order giving them effect has been made and published. This explains the appearance of this Bill before the House today.
In addition to this measure, I can assure the House that the various other provisions of the existing groceries orders will be actively enforced. I am confident, however, that the various parties in the trade will comply with the relevant regulations and that the situation will be defused to an extent which will create a climate conducive to the early conclusion of negotiations on terms and conditions of supply. It is my earnest wish that these negotiations will be brought to a successful conclusion as early as possible and I trust that the House, in confirming this order, will share in these sentiments.
