Live export ban could lead to ‘unfair trading practices’: Australian Competition and Consumer Commission

Australia’s competition watchdog has raised concerns the Albanese Government’s impending live sheep export ban could encourage “unfair trading practices” and “anti-competitive behaviour” in the WA livestock market. The Australian Competition and Consumer Commission has flagged a range of adverse impacts that could result from the policy, including a “reduction in competition” and “downward pressure on farmgate prices”. The concerns were flagged in the ACCC’s submission to the independent panel leading consultation on how and when to phase out WA’s $92 million live sheep shipping industry. “The loss of access to live export markets and the potential reduction in competition due to fewer buyers of WA sheep may lead to poorer outcomes for sheep producers by increasing the market power of remaining buyers in a relatively concentrated market,” ACCC deputy chair Mick Keogh said. “This increases the risks of businesses using unfair trading practices in their dealings with sheep producers and the risks of anti-competitive behaviour through the supply chain.” Mr Keogh, who signed off on the submission, said a 2017 market report by the ACCC observed livestock agents could represent multiple buyers and sellers, or both buyers and sellers, in a single transaction. The report found this could create a conflict of interest for the agent and potentially suppress competition between buyers and sellers, leading to “artificial” prices for livestock. “These risks may be heightened by the phase-out if this leads to further consolidation within the livestock agency sector,” Mr Keogh said. He said there were currently no licensing requirements for livestock agents in WA, unlike in some other jurisdictions. The same report also identified a reduction in competition that arose when a single commission buyer acted on behalf of multiple meat processors or exporters in purchasing livestock at saleyards. “The reduction in potential purchasers at livestock sales (due to the removal of live export buyers) will be likely to further exacerbate the reduced level of competition arising from the operation of commission buyers,” Mr Keogh said. “The phase-out may (also) increase demand for sheep processing facilities in WA. “If domestic markets are flooded with excess sheep, this would tend to impose downward pressure on farmgate prices and negatively impact Australian sheep producers.” Risks associated with an oversupply of sheep in the short to medium term could be mitigated with a longer phase-out transition period, he said. Eneabba sheep producer Chris Patmore, chair of the Pastoralists and Graziers Association’s livestock committee, said he agreed with all the ACCC’s concerns. “This is a good submission from an organisation with the credibility of the ACCC,” he said. “They’ve highlighted the reduction in competition in a market which already has a limited number of buyers in genuine competition with each other. “As producers, we’re acutely aware of this through bitter experience. “They’ve also raised the risk of collusion between the remaining competitors.” The ACCC also highlighted transparency measures that could be implemented to mitigate risks associated with reduced competition, including the establishment of a publicly available buyers’ register at saleyards. The register would include details of commission buyers and livestock agents intending to bid at the sale, and the principals those buyers would be acting for. Episode 3 analyst Matt Dalgleish said the ACCC had rightly identified the important role live export traditionally played in providing extra competition in the WA market. “If you’re talking about abattoirs as a final purchaser of the item once it’s completely finished as a heavy lamb, for example, there’s not many of them there,” he said. “There are a few processors, but when you’re talking big ones, there’s really only a handful, so with live export out of the picture completely, that would be a concern.” Mr Dalgleish said offering incentives to “medium tier abattoirs” looking to invest and expand their footprint — such as Minerva Australia — could help increase competition. “They’re the types of players that we maybe need to encourage and provide assistance, but not just financial assistance… because there’s other non-financial hurdles that could be expedited as well,” he said. Other possible solutions he suggested included a short-term freight subsidy program to encourage transport from WA to the Eastern States, and improving access into the lighter carcass boxed meat market in the Middle East.