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June, 2024

Government backs mandatory penalties for supermarkets of $10m or 10% of annual turnover

The Government will back mandatory penalties for the supermarket giants of up to $10 million or 10 per cent of annual turnover if they breach their obligations to suppliers.

The decision to move away from the supermarket industry’s voluntary code of conduct to mandatory legislation is one of several recommendations made in an inquiry led by Dr Craig Emerson, which the Government said it now plans to support. The inquiry’s findings were part of a final report submitted this week.

The mandatory code will apply to those with annual revenue of $5 billion or more, which means Coles, Woolworths, Aldi and Metcash. However, it’s suggested this is also likely to cover Costco and Amazon if the latter choose to sell groceries online.

The likelihood of a mandatory food and grocery code was first mooted in April as one of eight recommendations from Dr Emerson in the interim Foods and Grocery Code of Conduct Review.

Speaking to ABC News Breakfast, the treasurer, Jim Chalmers, said the plans will require Parliament to change the Australian Competition and Consumer Act in order to realise the Food and Grocery Code plans. While there’s no set timeframe as yet, he flagged it as a priority.

“We will do that when we can – we need the support of parliament to do that. We want to bed this down as soon as we can so we can ensure the supermarkets are doing the right thing by their growers, suppliers and by their customers,” Chalmers said.

“This is about getting a fair go for families and a fair go for farmers. Our efforts will help to ensure our supermarkets are as competitive as they can be so Australians get the best prices possible. In addition to penalties, the Government has asked the Australian Competition and Consumer Commission (ACCC) to investigate supermarket pricing as it affects both suppliers and consumers. More on that is due in August.

As also reported by the ABC, Coles said in a statement it had worked collaboratively with Dr Emerson and is now considering the Government’s recommendations and plans in detail and reiterated its commitment to supporting a “health and sustainable grocery sector”.

In his report, Dr Emerson said since commencement of the dispute-resolution provisions of the voluntary Code in January 2021, only six disputes have been lodged with Code Arbiters. Supporters of the voluntary Code cite this as evidence that the Code is working well, but he viewed it as more likely to be the opposite.

“Critics of the voluntary Code point to the small number of disputes as evidence not of its success but of its failure. They nominate the fear of retribution by supermarkets as the dominant reason for so few disputes being raised by suppliers. Retribution could take many forms, including the unfavourable renegotiation of terms and conditions of supply, relocation of shelf space to less popular locations within stores, and total delisting of a supplier’s products,” Dr Emerson said in the executive summary.

“Whether or not such fears of retribution are justified in every case, the Review has heard compelling evidence that these fears are real for most suppliers, especially smaller suppliers, and act as a powerful deterrent to making formal complaints under the voluntary Code.”

The report suggested penalties of up to $10 million for serious breaches, or 10 per cent of annual turnover of the company – whichever is greater. It also suggests immediate penalty notices of $187,800 for less serious breaches.

Other recommendations made in Dr Emerson’s report include more efforts on addressing the fear of retribution, a look at incentive schemes and payments to buying teams and category managers to ensure they’re consistent with the purpose of the code, a complaints mechanism to enable suppliers and market participants to raise issues directly and confidentially with the ACCC, and a code supervisor who produces annual reports on disputes and results of confidential supplier surveys.

In a statement, the treasurer confirmed it’s also backing an anonymous supplier and whistle‑blower complaints mechanism within the Australian Competition and Consumer Commission, improving outcomes for suppliers of fresh produce, and strengthening formal and informal dispute resolution arrangements.

Last week, a new report by Choice also compared the cost of groceries from major supermarkets on a basket of groceries. It’s one of a quarterly series of price monitoring reports the Government is supporting by Choice.