Can we, the people, break up Coles and Woolworths?
I get the feeling this past month that farmers and politicians are sharpening their axes, ready to put Woolworths, and then Coles, on the chopping block and break them up into lots of smaller, less powerful companies. Even if there is a strong political will to do so, is it possible? And if possible, is it likely?
The first question is easy to answer. Right now, Australian law does not have the power to break up companies. More importantly, the Albanese government doesn't want legislation that would give the courts the power to do so. Anthony Albanese last month said that Australia was not the "old Soviet Union."
While the USA and the U.K. have the power to chop up companies - these are called divestiture powers, Australia does not. And while I could argue the case for adding this tool to our tool belt as a nation, the truth is that it is rarely used. You only have to look at the growing wealth and influence of global corporations to see that it is way too late to approach these hulking giants with merely an axe. The problem is more fundamental than that. We live in a capitalist society. Yes, here I go again, banging on about capitalism. But we forget that Woolworths and Coles must, essentially, put their shareholders first. Putting their shareholders first means increasing profits. They can, and should, do everything within the law to increase profits.
There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud... Milton Friedman, American Economist 1912-2006
Whether or not they have acted within the rules of the game will be decided through further investigations such as the Senate enquiry into price gouging and the enquiry by the ACCC. In addition, Choice has been given additional government funding to do quarterly price monitoring. Despite all three of these enquiries having the best of intentions, I am not confident that they will prove that serious unlawful behaviour has occurred.
Yes, the sharpening of the axes, so to speak, may halt predatory behaviour for a while but only until we are all distracted by the next shiny thing. When unethical behaviour is brought to light, it is not good for business but all too soon the next corporation is in the spotlight for their unethical behaviour and the previous one slinks away hoping their naughtiness will be forgotten.
Qantas didn't have to change behaviour; it just had to make some polite noises and wait it out. I believe that is what Coles and Woolworths will do too.
Real change must come from a change to corporate law that requires the corporation to outline its purpose, including its social purpose within its constitution. Corporations like to wax lyrically about what good citizens they are - but if made to put it in their constitution, corporate law should then hold them accountable to meet that purpose and abide by it. Even be prepared to be judged against it by a court of law. If the company avoids having a purpose that goes beyond profit making, it should cost them customers. Besides, it is no longer good enough to have profit as the only goal, or even the major goal. Being a good corporate citizen should come first, but it will only happen if it is a legal requirement.
This seems like pie in the sky stuff, but it is based upon a paper from The Honourable James Edelman, a justice of the High Court published over three years ago. You see, it is not just customers and suppliers that need greater protection from unethical practices.
Sometimes small shareholders are treated poorly too.
I think that currently there is the political will to do something but neither the Labor nor the Liberal parties will have the appetite for slicing up Coles and Woolworths, despite the will of the minor parties and Independents. And really, this is an opportunity to look at corporations as a whole and force every one of them to be better citizens. Asking them to spell out their purpose as corporate citizens of this country in a legally accountable way; and holding them to it, would be a very good start and very hard, politically, for corporates to argue against.
While these enquiries will be an embarrassment to the board and senior management of Coles and Woolworths, I doubt that it will impact sales all that much and in the longer-term share prices will bounce back.
In short, I seriously doubt that any of these three current enquiries will be more than a slap in the face for Coles and Woolworths.
I'll slap my own face, and gladly, on a video on this website, if the result is the breaking up of these two supermarket giants.
We'll know within a year!
Kimberley Gillan
For more info on this post:
[High Court of Australia: Justice Edelman paper 2020] (https://cdn.hcourt.gov.au/assets/publications/speeches/current-justices/edelmanj/EdelmanJ29oct19v2.pdf) ABC: New Albanese Coles Woolworth duopoly NCA NewsWire: Nats back big stick for coles woolies
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Cover Photo: Ivan Tsurov Unsplash.com
Pizza: Benu Marinescu, Unsplash.com
Neon Pizza Sign: Henrique Hanemann Unsplash.com
Go Up And Never Stop: Fab Lentz, Unsplash.com
AI Chip: Igor Omilaev, Unsplash.com
Further resources:
[Justice Edelman paper 2020] (https://cdn.hcourt.gov.au/assets/publications/speeches/current-justices/edelmanj/EdelmanJ29oct19v2.pdf) ABC new Albanese Coles Woolworth duopoly MSN Nats back big stick for coles woolies