The Government has put out the first exposure draft to introduce a Mandatory Food and Grocery Code in Australia and is now calling for responses.

If adopted, the code would see Woolworths, Coles, Aldi and Metcash all facing $10 million or more penalties for serious breaches of the code. News of the draft dropping coincides with the ACCC’s confirmation it’s now pursuing legal action against Coles and Woolworths over allegations they’ve misled consumers through their respective ‘Down Down’ and ‘Prices dropped’ marketing campaigns.

The mandatory code will cover grocery retailers with annual revenues exceeding $5 billion. At this stage, Costco and Amazon are not included, something that has already been questioned by Woolworths in its initial response to the interim report on the code of conduct. But in a press briefing today, Prime Minister Anthony Albanese said the Government would examine this further as consultation opens on the new draft.

The release of the exposure draft follows a Food and Grocery Code of Conduct inquiry and review conducted by Dr Craig Emerson earlier this year. Among key recommendations of the review were to make the code mandatory, strengthen dispute-resolution arrangements, addressing supplier fears of retribution from the duopoly, introducing new penalties for breaching the code, and improving overall outcomes for suppliers.

The Government announced it would implement all 11 of the recommendations of the review in June this year. Notably, the Legislation Act 2003 does not specify any conditions that need to be satisfied before the power to make the Regulations may be exercised.

It’s also now working to adjust the Competition and Consumer Act in order to allow for higher maximum penalties for breaches of the Food and Grocery Code of Conduct. The plan is for a maximum penalty of the greater of $10 million, three times the benefit gained from contravening conduct, or if the benefit cannot be determined, 10 per cent of turnover for the preceding 12 months. Currently, Australia has a self-regulated, voluntary food and grocery code due to sunset on 1 April 2025. Once finalised, the new mandatory code would take over from that date.

“The Government understands the importance of an effective dispute resolution process, with both formal and informal options to settle disputes. We will also be creating an anonymous supplier and whistle-blower complaints pathway through the Australian Competition and Consumer Commission (ACCC),” the Federal Government stated in its response in June.

“We will also introduce additional obligations to protect suppliers from retribution by supermarkets.”

“We understand that more needs to be done to achieve a competitive and sustainable food and grocery sector that works for Australian farmers and families.”

In addition, the ACCC is now conducting an inquiry into supermarket pricing, with a final report and recommendations due in February 2025. The Government also provided funding to consumer watchdog, Choice, to conduct quarterly price monitoring reports to provide consumers with more information about where to access the best deals, with the first report out later this month.

In its interim response on the Grocery Code of Conduct, Woolworths also said local retailers who compete with grocery categories for household products and personal care, such as Chemist Warehouse and Bunnings, should also be captured with the code framework. The code of conduct consultation process is open for submissions until 18 October 2024.

“We know there’s more to do and my government wants to ensure that Australian consumers get a fair go,” Albanese said in announcing the draft exposure code.