Key Points
- The Food and Grocery Code of Conduct is a voluntary agreement between suppliers and supermarkets.
- A recent inquiry found that suppliers were too afraid to raise concerns about violations out of fear of retribution.
- One of the inquiry's main recommendations was to make the code mandatory for all major retailers.
An inquiry into the behaviour of major retailers, who have been under scrutiny for rising profits amid cost of living pressures felt by their customers, has produced its first results.
The review into the Food and Grocery Code of Conduct has brought to light the troubling relationship between supermarkets and their suppliers.
The inquiry has found an imbalance of power in that relationship, with many suppliers, including farmers, fearing retribution if they voice concerns over the code being breached.
The code has remained voluntary until now and is considered a largely ineffective agreement among all parties in the grocery industry to improve business behaviour.
Following the results of this inquiry, former Labor minister Craig Emerson has recommended the code become mandatory.
He has also called for the introduction of heavy penalties of up to $10 million — or, alternatively, 10 per cent of a supermarket's annual revenue — for any parties that violate the code.
More serious breaches of the code could bring further punishments.
The code is set to apply to any retailer with an annual revenue of over $5 billion, which would include supermarket giants Coles, Woolworths, Aldi and IGA, but could also cover other major retailers if they make the move towards the grocery sector.
Supermarkets accused of profiteering from customers, suppliers
The federal government confirmed on Sunday that it would accept all recommendations of the inquiry. However, a timeline for the implementation of these new changes in the Competition and Consumer Act has not been provided.
Aside from making the code mandatory, the government has also pledged to create an anonymous supplier and whistle-blower complaints mechanism and strengthen formal and informal dispute-resolution arrangements.
"Our efforts will help to ensure our supermarkets are as competitive as they can be so Australians get the best prices possible," Treasurer Jim Chalmers said.
The inquiry follows calls for a crackdown on the two major supermarket chains in Australia, Coles and Woolworths, who have reported record profits for several years in a row.
The two grocery store giants have been accused of using unjust methods to secure revenue, such as price-gouging clients or undermining suppliers.
This review is a part of the government's plan to bring major reforms in the competitive sector, with an independent review by Australia's consumer watchdog also looking into supermarket prices.
The results of that review are still a few months away with an interim report expected in August.
