Coles and Woolworths would benefit from more flexible opening hours and be able to sell prescription medication under the Harper review's recommendations, but the supermarket giants are fighting against a new "effects test" being introduced into competition law.
The federal government's competition policy review recommended changing competition laws so that companies can be prosecuted for conduct that has the effect or likely effect of substantially reducing competition. The current test, which has been difficult to prove, requires regulators to demonstrate that a company used its market power with the "purpose" of damaging a competitor.
The proposal has been greeted warmly by the government and the Australian Competition and Consumer Commission, but has been criticised by the Australian National Retailers Association (ANRA), which represents Woolworths and Coles.
The ANRA said an effects test would have a "chilling effect on competition" and "dampen pro-competitive behaviour".
"We would urge the Government to focus on tangible changes that are possible and put an end to the politicisation of barriers that chills investment and has a negative impact on the economy, like removing restrictions on parallel imports, retail trading hours and pharmacy ownership," the ANRA said in a statement.
Coles and Woolworths have said that an effects test could hurt consumers by discouraging retailers from expanding their operations. It could also increase litigation and red tape, potentially leading to increased prices at the checkout.
Small business minister Bruce Billson, who is considering the review's recommendations, said claims that such a test would have a chilling effect on competition were "amusing".
"[T]he whole point of the competition law is to put some bumper rails either side of dominant businesses and other conduct in our market that is damaging to the economy and to consumers," he told ABC radio.
Supermarkets have applauded many other recommendations in the review, including calls for a review of the sale of alcohol and to end restrictions on pharmacy ownership and location. If adopted, Coles and Woolworths would be able to compete directly with pharmacies.
Liberal Party MPs said they do not expect the government to support pharmacy deregulation, which is fiercely opposed by the politically-powerful Pharmacy Guild.
"Abbott has absolutely no appetite for this whatsoever," a Liberal politician said. "They don't have to twist Tony's arm."
Independent senator Nick Xenophon said: "Make no mistake, deregulating pharmacies will mean Coles and Woolworths will dominate this sector in next to no-time.
"Do we really want medications and associated health advice to be doled out like discount bread and milk?"
Coles and Woolworths also support the reviews call for state governments to scrap restrictions on retail trading hours, except on Christmas Day, Good Friday and the morning of Anzac Day.
Coles has pointed out that supermarkets in one Western Australian town, Busselton, operate under restricted hours while supermarkets in towns 20 kilometres away face no restrictions.
The Harper report also called for a review of whether supermarkets are allowed to sell alcohol in their stores.
"Trading hours restrictions and restrictions preventing supermarkets from selling liquor impede competition," it said.
Coles and Woolworths also supported the review's calls for simpler and more nationally-consistent planning and zoning laws.
Professor Harper said the review did not aim to make life "tougher or easier" for big supermarket chains, but to increase competition and benefit consumers.
