New Grocery Code takes force

02 Mar, 2015 08:20 AM
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The new Code is designed to limit market power abuses which would also impact farmers

THE federal government's final Food and Grocery Industry Code of Conduct will be tabled in federal parliament this week.

Small Business Minister Bruce Billson announced the Code’s tabling today at parliament house in Canberra, with Australian Food and Grocery Council (AFGC) chief executive Gary Dawson.

The Code has been designed between the government, supermarkets and the AFGC, with the process starting in 2011 to try to curtail market power abuse in the retail supply chain.

Mr Billson said the new Code takes force from tomorrow and will improve the supply chain dispute resolution process.

The National Farmers' Federation (NFF) pulled out of the Code development process prior to the 2013 federal election demanding a compulsory code of conduct, rather than a voluntary one.

The new Code is designed to limit market power abuses which would also impact farmers, with specific focus on actions by the dominant retail duopoly Coles and Woolworths.

A consultation paper was released last year to help ensure the Code complied with powers within the Competition and Consumer Act 2010.

Is it enough?

Farmers groups have questioned if the capacity of a voluntary code is strong enough to protect farmers’ interests and would ensure all supermarkets were captured by its powers – not just Coles and Woolworths.

But Mr Billson says there’s been confusion over the terms, last year saying it would be an opt-in enforceable code.

“Some people think it’s a voluntary code, in that you can decide you can abide by it one week and not the next and then maybe the week after, but that’s not right,” he said in an interview with Fairfax Agricultural Media.

“It’s a code that says ‘respondents agree to be bound by it’ and once they’ve made that agreement it’s then enforceable.

“Compliance with it is mandatory, once you choose to opt-in to the framework.

“The major supermarkets have said they’ll opt in and I’m encouraging others in the retail supermarket industry and in the supermarket supply chain to also participate.”

Mr Billson said today although he has had a positive response from retailers so far, there was still scope to make the Code of Conduct compulsory if voluntary compliance was not forthcoming.

NFF chief executive Simon Talbot "cautiously" welcomed the Food and Grocery Code of Conduct, noting that to be effective it must include a commitment from all major retailers.

“The NFF has maintained support for a mandatory, binding code; but this voluntary prescribed Code is a constructive step towards addressing the issues of concern to the farm sector,” he said.

“The proof of this pudding will be in the eating - we will be monitoring how the initiative will work in practice.

"The government has made a start on fixing the issues in the supply chain, but the work is not done yet."

An historic step: AFGC

The AFGC said the Code of Conduct was “an historic step” towards levelling the playing field for food and grocery suppliers in their transactions with the major supermarkets.

Mr Dawson said the minister's announcement was integral to achieving a meaningful and enforceable Code to, “drive behavioural change to encourage fair and effective competition in the long term interests of consumers”.

“We congratulate the government for progressing the Code as an industry-led solution to problems impacting on suppliers and consumers,” said Mr Dawson.

“The Code was developed initially through negotiations with Coles and Woolworths, and it was their willingness to come to the table and develop a meaningful Code that made it possible.

“Signing onto the Code will be a mark of the retailer's commitment to fair dealing and to improving the operation of one of the most dynamic and competitive sectors of the economy – the fast moving consumer goods sector.”

Mr Dawson said the Code establishes a clear set of principles relating to key aspects of trading relationships between retailers and suppliers.

He said it would also provide greater certainty and clarity about dealings in the industry without adding unnecessary complexity or cost.

“The Code will now be tabled in Parliament as a regulation under the Competition and Consumer Act 2010 to give it real teeth,” he said.

“The Minister for Small Business has been one of the strongest advocates of the Code, which sets clear ‘no go’ areas, including the types of behaviour that led to recent unconscionable conduct cases.

“Once in place it will set clearer rules of engagement.

“It provides a real opportunity to drive changes in behaviour and be a real circuit breaker in retailer-supplier relations by entrenching new standards of behaviour including at buyer level.”

Relying on supermarkets to toe the line

The Queensland Dairyfarmers’ Organisation (QDO) said that the announcement was a long-awaited step in the right direction to addressing the imbalance of market power between supermarkets and producers, but not a big enough one to reassure suppliers.

QDO president Brian Tessmann said the code should be mandatory, include financial penalties, and be overseen by a dedicated supermarket ombudsman.

“With a raft of recent charges by the Australian Competition and Consumer Commission (ACCC) against the major supermarkets, when the supermarkets had been previously stating they were doing no wrong - particularly Coles - this leaves us somewhat lacking trust in what they have put forward now,” Mr Tessmann said.

ACCC chairman Rod Sims said the new code offered suppliers extra protection from abuse of market power and would grant the consumer watchdog new powers of enforcement.

"Once retailers and wholesalers sign up to the code, we will be able to enforce it and take court action for breaches. We will also be able to audit retailers and wholesalers to check that they are complying with the code,” he said.

“There can be a significant imbalance in bargaining power between suppliers and large grocery retailers and wholesalers.

"The code seeks to limit some of the conduct that was brought to the ACCC’s attention during our supermarket suppliers’ investigation," Mr Sims said.

“The new code, together with the recent Court judgment that Coles acted unconscionably, makes it clear that no matter how much bargaining power a retailer holds, they must deal with their suppliers fairly.”

Key aspects of the Code include:

  • Tough restrictions on retrospective and unilateral variations to grocery supply agreements;
  • Greater transparency on the basis of shelf allocation for branded and private label products;
  • Recognition of the importance of intellectual property rights and confidentiality in driving innovation and investment in new products; and
  • A low cost and fast track dispute resolution mechanism.
  • - with FarmOnline

    FarmOnline
    Colin Bettles

    Colin Bettles

    is the national political writer for Fairfax Agricultural Media

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