Releasing the Interim Report of the Review of the voluntary Food and Grocery Code of Conduct (the Code) today, the Independent Reviewer, Dr Craig Emerson, announced it makes 8 firm recommendations, including that the Code be made mandatory, with penalties of $10 million or more for serious breaches.
The Report makes a further 3 recommendations on which stakeholder views are sought.
The mandatory Code would be enforced by the competition watchdog, the Australian Competition and Consumer Commission (ACCC).
For serious breaches, the ACCC would be empowered by Parliament to seek penalties from the courts of up to $10 million, 10 per cent of a supermarket’s annual turnover, or 3 times the benefit it gained from the breach, whichever is greatest.
Penalties for less serious breaches would be up to 600 penalty units, which at present is $187,800.
Dr Emerson said making the code mandatory was essential to deal with the heavy imbalance in market power between the major players – Coles, Woolworths, ALDI, and Metcash – and their smaller suppliers.
‘The voluntary Code of Conduct has no penalties, leaving the competition watchdog chained up on the back porch’, Dr Emerson said.
The Interim Report also makes firm recommendations to strengthen protections for suppliers against possible retribution from supermarkets.
Dr Emerson said: ‘A new mechanism for making confidential complaints to the ACCC would be of great value to suppliers fearful of retribution from supermarkets if they made a complaint to them.’
Dr Emerson’s support for making the Code mandatory was shared by the ACCC, former ACCC Chairs Rod Sims and Allan Fels, the National Farmers’ Federation, AUSVEG, Australian Dairy Farmers, the Australia Chicken Growers’ Council, Fresh Markets Australia, and 16 other stakeholders.
Dr Emerson pointed out that getting a better deal for smaller suppliers was also in the interests of supermarket customers.
‘An effective Code of Conduct would benefit consumers through greater choice and better prices by enabling suppliers to innovate and invest in modern equipment to provide higher?quality products at lower cost,’ he said.
Critics of the Code being made mandatory argue that the only recourse for a small supplier adversely affected by a breach of the Code would be a lengthy ACCC court action, by which time the supplier would have gone broke.
But Dr Emerson concluded it was possible to obtain ‘the best of both worlds’ with a low?cost alternative to court proceedings. This would involve replicating options for independent mediation and arbitration that are used in other industry codes.
The existing Code Arbiters employed by the supermarkets would be redesignated Code Mediators and would be able to hear confidential complaints and assist parties to reach a settlement, if requested by the supplier.
If, however, a supplier wanted an independent mediator, this would be available.
If mediation failed, an independent arbitrator could be appointed to resolve the dispute.
Owing to constitutional limitations, legislation cannot force the use of arbitration to resolve disputes. Dr Emerson’s review is therefore asking the supermarkets and Metcash to agree to independent arbitration by accredited, professional arbiters with compensation to a supplier capped at $5 million.
The existing Independent Reviewer would be renamed the Code Supervisor. Suppliers could raise issues confidentially with the Code Supervisor, who could be requested to review the processes of a Code Mediator.
The Code Supervisor would produce annual reports on disputes and on the results of a confidential supplier survey.
The Interim Report welcomes stakeholder feedback on the recommended dispute?resolution processes.
Dr Emerson said he also wanted to hear from stakeholders about whether provisions of the existing Code that allow supermarkets to contract out of the Code’s obligations should be tightened.
For example, if provided for in a grocery supply agreement, the Code allows supermarkets to vary a contract unilaterally, require a supplier to fund promotions, and pay for wastage at the supermarket premises.
Dr Emerson said: ‘If suppliers have no ability to influence the terms of a grocery supply agreement, the practice of supermarkets in contracting out of their obligations makes the Code farcical.’
Stakeholder views are also sought on whether additional protections are needed for suppliers of fresh produce.
All the Interim Report’s recommendations are at Attachment A to this statement.
The review has held more than 40 meetings with stakeholders this year, as well as conducting a producer roundtable with agriculture minister Senator the Hon Murray Watt, involving 17 producer groups, and a processor roundtable involving 15 processor groups.
The review has received 56 submissions in response to the Consultation Paper, which was released on 5 February 2024.
Stakeholders are invited to make submissions to the Interim Report by 30 April 2024.
The Final Report will be provided to the Government by 30 June 2024.
Dr Emerson thanked the Secretariat team led by Anna Barker for their hard work and diligence in arranging stakeholder meetings, reviewing submissions, and supporting the preparation of the Interim Report.
Above is the statement (8/10/2024) by Dr Craig Emerson, the Independent Reviewer of the Food and Grocery Code of Conduct, on the Interim Report. The statement and the accompanying Attachment A, containing both the firm and draft recommendations, can be found here (https://treasury.gov.au/consultation/c2024-510813/statement). This Interim report and associated recommendations come as multiple supermarket inquiries are under way.