Predatory pricing !

Our two independent Senators - Nick Xenophon and Barnaby Joyce - will introduce a private members bill to try and stamp out predatory pricing - where big companies deliberately employ selective pricing cuts to drive nearby competitors out of business.

This is prevalent in both the grocery trade and in petrol pricing. The grocery majors are quite happy to run a store at a loss if in so doing they bankrupt competing butchery and green grocer shops - and immediately inflate their prices back to normal when they have achieved a monopoly.

Stores that have a nearby Aldi outlet have lower priced merchandise than stores that lack this competitor.

A similar situation exists with petrol. The grocery majors use their bulk buying power to undercut independent competitors with the intention of destroying competition.

Unfortunately achieving parity and protecting smaller operators could have unwanted side effects. There is a real danger of " throwing the baby out with the bath water ! "

There is the suggestion of implementing a 35 kilometre exclusion zone whereby any price discount must be equally available to smaller operators. In such a scene both the grocery majors and independent service stations would buy fuel at the same price - but it would not stop the grocery major from dropping the profit margin to zero. That would take the implementation of a law requiring sales to contain a profit margin.

Any protection law would run the risk of destroying the corner stone of business. You get a better price if you buy in bulk.

We accept that the major whitegoods discount stores will offer us a better price on television sets, refrigerators and washing machines because their bulk buying power lets them negotiate a rock bottom price with the manufacturer.

If the law requires a corner shop nearby to purchase at an identical price the whole principle of SPQT - small profit - quick turnover - falls in a heap. The only sure outcome would be a price rise by the discounter - because advantage has been lost !

The parliament needs to tread carefully when it considers " geographic price discrimination " legislation. Pricing is a complex can of worms and it would be too easy to end up with an unfortunate result by trying to achieve a level playing field.

The intention is good - achieving it is near impossible !