Australian Government Imposes Code of Conduct on Supermarkets

In a significant policy shift, the Australian federal government has confirmed that it will impose a mandatory code of conduct on large supermarket chains, ensuring fair treatment of suppliers and imposing hefty fines for breaches. This move transitions from the decade-old voluntary code of conduct, which supermarkets themselves had drafted, to a more stringent and enforceable regulatory framework.

This decision comes on the back of a comprehensive review conducted by former labor minister Craig Emerson. The review’s main recommendation, now adopted by the government, is to enforce the code with tougher prohibitions against unreasonable demands and threats to suppliers. The code will apply to supermarkets with annual revenues of $5 billion or more, including Coles, Woolworths, ALDI, and wholesaler Metcash. Emerson also suggested that the code should cover Costco in the future and potentially Amazon if it expands into online grocery sales.

Supermarkets will now be required to engage with suppliers “in good faith” and will be prohibited from retaliating against those who raise complaints. Failure to adhere to these requirements could result in fines up to three times the benefit gained from the misconduct or up to $10 million. If the benefit derived from the misconduct cannot be determined, the fine could also be 10% of the supermarket’s annual turnover. While these fines must be approved by a court, the Australian Competition and Consumer Commission (ACCC) will have the authority to issue up-front infringement notices of up to $187,800 for breaches.

The new process for suppliers seeking compensation introduces mediators in the first instance, followed by independent arbitrators if mediation fails. This replaces the current system where suppliers’ cases are heard by arbitrators appointed by the supermarkets themselves, which has resulted in few successful complaints. While supermarkets cannot be forced to participate in arbitration due to constitutional constraints, they have agreed “in principle” to respect arbitrator decisions up to $5 million for small suppliers.

In a statement, Treasurer Jim Chalmers and other ministers emphasized the government’s commitment to addressing the power imbalance between supermarkets and suppliers, including farmers. The government aims to swiftly implement the mandatory code through regulatory adjustments, though the new penalties will require legislative changes to the Competition and Consumer Act. The Coalition has indicated its support for the mandatory code, suggesting a smooth legislative process.

“The review found that the current voluntary code is failing to address the imbalance of bargaining power between supermarkets and their suppliers, including farmers.”

 Treasurer Jim Chalmers via ABC News

In addition to these measures, the government has tasked the ACCC with examining supermarket pricing’s impact on both customers and suppliers. An interim report is expected by the end of August. Furthermore, the government has commissioned quarterly price monitoring reports from consumer advocacy group Choice, with the first report already released, highlighting that basic grocery items are 25% cheaper at ALDI compared to Coles and Woolworths.