A Coalition sticky spot for shopping centres

Woolworths chief executive Grant O’Brien and Coles boss Ian McLeod have woken up to just how dramatically the big corporate game is about to change in Australia with the proposed new “fair contracts” legislation.

Accordingly they have moved quickly to be ahead of the game.

By contrast I fear that Westfield’s Frank Lowy and the chiefs of other shopping centre owners have misread the “fair contracts” game and are in danger of falling into the dangerous space of resorting to lobbing to delay the “fair contracts” legislation. Woolworths and Coles are too smart to be caught in what will almost certainly be an unsuccessful lobbying game.

As Business Spectator has reported on many occasions, the Abbott government is like no other post-war Coalition government. It is a government dedicated to looking after Australia’s largest employment group small enterprise, and believes that’s how it will generate employment. (Abbott's 12-point plan to transform Australia, September 9 and Abbott's 12-point plan to transform Australia: Part 2, September 10.)

In the first pillar of the government’s 12-point plan for Australia, the small business minister, Bruce Billson, was placed in the inner cabinet – the first for any government in post-war Australia.

The third pillar of the 12-point plan is a pivotal policy. The Abbott government is determined to extend the protection offered to consumers against unfair contracts to small business.

Most large companies and organisations will need to completely rewrite the bulk of their contracts.

Coles and Woolworths did not wait for the legislation but jumped in and released a draft Food and Grocery Code of Conduct to balance out relationships between retailers and suppliers. The government was consulted on the draft, which will now be the subject of detailed consultation and consideration. At the end of the consultation and regulation process, the agreement will go through the cabinet process before being implemented through regulation.

Bruce Billson says: “It's pleasing to see the industry collaboratively working together to achieve an outcome which regulates the way suppliers and retailers interact.”

No such agreement has been foreshadowed by the shopping centre owners. In foolishly lobbying for a delay in the fair contracts legislation, the shopping centre owners do not realise that as the third pillar of the 12-point plan, its importance to the Coalition is not far behind carbon tax abolition.

Instead of having clear input on the outcomes, as Woolworths and Coles have achieved, the shopping centre owners may need to rely on what rules the legislation sets. 

Most of the current shopping centre rent agreements have no hope of being declared “fair” – indeed, they are a prime target for the proposed legislation.

Many franchise agreements face a similar challenge. As Stephen Bartholomeusz pointed out Metcash, Costco, and Aldi are not part of the draft Woolworths-Coles agreement,  so they will need to comply  with the broader legislation (How to halt a supermarket sweep, November 18).

Meanwhile the small business Coalition juggernaut led by Bruce Billson keeps rolling on.  In previous governments the small business officials were housed within departments like administration. Now small business is housed in the Treasury so it will be at the heart of policy making.  Both Treasurer Joe Hockey and Assistant Treasurer Arthur Sinodinos are dedicated to making a difference in small enterprise and will not be pushed around by shopping centre owners or anyone else.

Already the Commonwealth is reviewing all its standard contracts that are under $200,000. A whole series of new “fair” government contracts are likely to arise in the review. Some public servants will try to fool Billson and play ‘Yes Minister’ games. Billson shows no signs of being a James Hacker. Once the “fair contract” rules for small business are set for the Commonwealth then they will spread quickly to the states. My guess is that principles that have been applied to government contracts plus Woolworths and Coles will be important in framing the legislation.

There is going to be a lot of flack from large companies, led by shopping centres.