Whenever a company gets into trouble with the Australian Competition & Consumer Commission, or any other government body, most corporate chiefs breathe a sigh of relief: it wasn’t us.
But the ACCC’s recent success in pursuing Coles should serve as a warning to both government organisations and large public companies -- your world is set to change.
The only way Australia can generate the jobs necessary to offset at least some of the carnage that will come from the end of mining investment, automotive closures and retail going online is by the expansion of small- and medium-sized enterprises.
Large companies and government organisations are all about shedding labour not increasing employment.
We have money at the ready for these smaller enterprises, with the banks saying that they want to back good projects. But smaller enterprises are very reluctant to push ahead and one of the reasons is that whenever they are dealing with large companies or government organisations the contracts they are required to sign are usually horrendous. The lawyers for the large organisations routinely add on unfair clauses which completely over power smaller enterprises.
The government has policy in the pipeline that will stamp out these practices almost overnight. It went to the polls promising to extend consumer fair contract provisions to smaller enterprises dealing with large government organisations or large private enterprises. If the government does take this step it will require hundreds of thousands of contracts to be redrawn, which, although a complex step, is probably the biggest thing the government can do for employment.
In the case of Coles, I am not sure what exactly their old supplier contracts said but the spirit of those contracts led the company into being too tough on suppliers and breaching the competition laws. Woolworths now faces a similar challenge. Coles (and Woolworths) have now introduced mechanisms to ensure fair trading with suppliers going forward. In the case of Coles, they have taken the remarkable step of giving former Victorian Premier Jeff Kennett power to adjudicate.
To some extent the past actions of Coles and Woolworths reflect what is still happening over a much broader canvas. I regularly hear about the slow payments and arrogance of government bodies and large corporations along with other examples of small enterprises being treated poorly.
However, extending consumer fair contracting rules to dealings between large organisations and small enterprises has been vigorously opposed by large organisations, including the public service.
Yet, unless the difference in market power between these small and large players is tackled, it is almost impossible for banks to lend to smaller groups and for them to generate employment. It also contributes to the big divisions in income inequality that are opening up in Australia and for that matter other western countries.
It is an area where the Abbott government can lead the world.
In the last twelve months the government’s big supporters have thrown everything into the fray to stop or defer it. However, the Shopping Centre Council of Australia has managed to secure an exemption and is now on board with the proposal.
It needs to be at the top of the agenda in 2015 and, as unemployment rises, it should be a reminder to the government that they need to start implementing their policy of boosting employment.
The large corporates and the public service will lobby hard in the Senate but I think that because fair contracting was originally a Labor policy it should be possible to get it through.