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VACC calls for protection for small business

Action needed: The Victorian Automobile Chamber of Commerce wants more protection for small businesses being squeezed by their larger clients.

Government should intervene to moderate market power of corporations: VACC

General News logo1 Apr 2013

AUSTRALIAN governments will have to intervene if the country’s crucial foundation of small business is to survive cost-down pressures that come with the new wave of “supercapitalism”, according to a leading automotive industry spokesman.

According to executive director of the Victorian Automobile Chamber of Commerce (VACC), David Purchase, big companies are increasingly transferring the competitive pressures they come under down to their smaller, weaker suppliers which are less able to cope.

Mr Purchase told the VACC President’s Dinner this week that, as tariff barriers and other restrictions have fallen in the cause of the free market, companies have had to get big in order to survive on what is a world stage, “Large companies have become more competitive, global, innovative and aggressive, often a law unto themselves,” he said.

The result has been “supercapitalism” and the increased aggression that comes with it has, in turn, led to claims that the big companies are treating the small companies unfairly.

“Many small businesses, be they suppliers to supermarkets, newsagents, independent service stations, new car dealers or motor vehicle crash repairers, are claiming that those big businesses with whom they deal are, increasingly, treating them unfairly and, in some instances, unconscionably.”

80 center imageLeft: David Purchase.

The result, according to Mr Purchase, is many small businesses being squeezed out of business and, with them, many job opportunities.

At present, the two million small businesses in Australia employ nearly five million people. Ninety-five per cent of those businesses employ less than 20 people.

“If we don't want to lose these employment opportunities, if we want to retain our strip shopping centres, if we want to prevent the unnecessary demise of many of our small businesses, what should we do?,” he asked.

Mr Purchase said one driver behind the increased aggression of the large companies was the move away from what is good for the country to what is good for the consumer and the investor.

“Large companies have had to reduce costs, which is often easier than increasing revenue, and one way they reduce costs is by squeezing their small business suppliers, requiring them to do more and more for less and less.” Mr Purchase said he rejected the free market mantra that it should be left to the market to resolve.

“I believe what we need is responsible market intervention by governments.” “This is the only way many otherwise viable small businesses will survive.” That, in turn, would preserve employment opportunities and other societal benefits.

“Would market intervention by governments allow some inefficient small businesses to survive? Yes it would, but that's a price I would be prepared to pay for what I see as the greater good.” Mr Purchase cited two examples of how the federal government had intervened in markets for the greater good of the community.

One was the Petroleum Retail Marketing Sites Act 1980, which prevented the big oil companies from owning more than five per cent of their branded service stations.

For 30 years, the Act kept many small independent service stations in business. After the Act was repealed, service station numbers fell from 22,000 to 6,000 now.

“Has the reduction in numbers, and the reduction in competition, done anything for the motorist, who certainly is not paying any less for fuel, let alone the independent who is no longer is in business?” “The repeal of the Sites Act, which the Fraser government obviously believed was responsible market intervention, resulted in the demise of a great many small businesses, a great many small independent service stations, and the uncompetitive fuel distribution arrangements we have in this country today.” He said the Fifth Community Pharmacy Agreement between the federal government and the Pharmacy Guild of Australia was a current example of intervention to preserve a societal benefit.

This agreement stops supermarkets operating pharmacies, thus preserving a greater number of smaller pharmacies across the suburbs, where they can be readily accessed.

“If we, as a society, as citizens, believe it's important to support small business then, in my view, we need to do more to achieve responsible market intervention, either directly by governments through legislation, or indirectly through such agencies as the Australian Competition and Consumer Commission,” Mr Purchase said.

Either that, or we could create specialist regulators for particular industries, such as in the UK where the Groceries Code Adjudicator decides whether supermarkets have unfairly dealt with their suppliers.

“Leaving it to the market won't satisfactorily address this issue.

“Market intervention by governments is the only way to ensure otherwise viable small businesses remain in business, resulting in real competition, choice and employment opportunities for young Australians.”

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