MAKING Australia’s voluntary Food and Grocery Code mandatory with increased penalties and stronger retribution and complaint protections would benefit sheep meat producers supplying supermarkets, National Farmers Federation president David Jochinke said today.

Independent review Craig Emerson today released his interim report of the Review of the voluntary Food and Grocery Code of Conduct (the Code) today, announcing eight firm recommendations that included that the code be made mandatory, with penalties of $10 million or more for serious breaches.

The review also recommended that the code should ensure that any incentive schemes and payments that apply to supermarket buying teams and category managers, and that there be a stronger retribution and complaints process involving the Australian Competition and Consumer Commission.

The review report has also made a further three recommendations on which stakeholder views are sought.

The review recommended that the mandatory code be enforced by the ACCC.

For serious breaches, the ACCC would be empowered by Parliament to seek penalties from the courts of up to $10 million, 10 per cent of a supermarket’s annual turnover, or 3 times the benefit it gained from the breach, whichever is greatest.

Penalties for less serious breaches would be up to 600 penalty units, which at present is $187,800.

Dr Emerson said making the code mandatory was essential to deal with the heavy imbalance in market power between the major players – Coles, Woolworths, ALDI, and Metcash – and their smaller suppliers.

“The voluntary code of conduct has no penalties, leaving the competition watchdog chained up on the back porch”, Dr Emerson said.

The Interim Report also makes firm recommendations to strengthen protections for suppliers against possible retribution from supermarkets.

Dr Emerson’s support for making the code mandatory is shared by the ACCC, former ACCC chairs Rod Sims and Allan Fels, the National Farmers’ Federation, AUSVEG, Australian Dairy Farmers, the Australia Chicken Growers’ Council, Fresh Markets Australia, and 16 other stakeholders.

Dr Emerson pointed out that getting a better deal for smaller suppliers was also in the interests of supermarket customers.

“An effective Code of Conduct would benefit consumers through greater choice and better prices by enabling suppliers to innovate and invest in modern equipment to provide higher‑quality products at lower cost,” he said.

Mr Jochinke said the NFF assumed that there had been so few complaints from suppliers under the voluntary “because quite frankly people are frightened.”

Mr Jochinke said the report backed farmers’ call for the code to be made mandatory and be bolstered with greater penalties for breaches.

“The status quo clearly hasn’t worked for many producers. Farmers have continued to suffer a massive power imbalance, so we support measures to improve transparency and accountability,” he said.

“Farmers need this stronger protection in negotiations where there is a large number of small producers dealing with a small number of large retailers.

“Clearly the code has not been working as it was intended for many producers and a mandatory requirement provides more certainty and confidence to stakeholders across the supply chain.”

The NFF has also welcomed the recommendation to increase the penalties for non-compliance to up to $10 million, or even higher in some circumstances.

“This should send a strong message to retailers that the code now has teeth,” Mr Jochinke said.

“Likewise, we support the proposal to better protect farmers from commercial retribution.

“It makes sense to monitor commercial decisions by retailer buying teams following a disagreement, and that will help give producers confidence to speak up.”

The NFF noted the report has acknowledged requests to be extended into other markets, in particular the greenlife sector which is dominated by one retailer, Bunnings, with a reported market share of upwards of 70 percent of the industry.

“We are encouraged the final report will consider this issue further as many of these growers are reporting also being subject to unfair market practices in the same way suppliers to the supermarkets have been,” Mr Jochinke said.

Report could address market power misuse – NSW Farmers

NSW Farmers Vice President Rebecca Reardon said the report’s recommendations around the code could finally set the wheels in motion to address market power misuse by supermarket giants.

“For years, grocery giants have had near unfettered ability to use their market power against suppliers, with a lack of accountability or penalties for any unconscionable behaviour impacting the supply chain,” Mrs Reardon said.

“Having a mandatory code of conduct for our supermarkets and their suppliers with enforceable, meaningful penalties for its breach could make the world of difference when it comes to cracking down on the harmful practices of these super powers.

“Anti-competitive activity needs to be stopped in its tracks, and it’s nice to hear the Federal Government step up and admit the current code is not good enough,” she said.

However, Mrs Reardon said Dr Emerson’s failure to back divestiture powers as one of the tools in the toolbox to address harmful behaviour by supermarkets was disappointing.

“Australia has one of the most highly concentrated supermarket sectors in the world, and this lack of competition has enabled these superpowers to behave as they have.

“We need a number of tools and reforms to address the issues at hand, and we have pointed to divestiture powers as one of these mechanisms that could in fact be very effective in busting supermarkets for unfair behaviour.

“Supermarkets have too much power, and too often, they are using it in a way that is hurting farmers and harming families,” she said.

“This market concentration is the core issue and the elephant in the room, which we need to address if we want to truly change the system.”

Further submissions invited

Mr Jochinke said the NFF encouraged producers to make further submissions to Dr Emerson’s review. The interim report also welcomed stakeholder feedback on the recommended dispute‑resolution processes.

Dr Emerson said he also wanted to hear from stakeholders about whether provisions of the existing code that allow supermarkets to contract out of the code’s obligations should be tightened.

For example, if provided for in a grocery supply agreement, the code allows supermarkets to vary a contract unilaterally, require a supplier to fund promotions, and pay for wastage at the supermarket premises.

“If suppliers have no ability to influence the terms of a grocery supply agreement, the practice of supermarkets in contracting out of their obligations makes the code farcical,” Dr Emerson said.

Stakeholder views are also sought on whether additional protections are needed for suppliers of fresh produce.

Supermarkets support a mandatory code

A Coles statement said the group is proud to be a founding signatory to the Food and Grocery Code.

“We remain committed to the objectives of the code in delivering value to our customers while maintaining strong, collaborative relationships with our valued suppliers.

“We support a mandatory code and would welcome the extension to other large companies that supply grocery products,” the company said.

“We will continue to work constructively as part of this review process.”

A Woolworths Group spokesperson said the group supported the code becoming mandatory for all large retailers and wholesalers of groceries to engender public trust and to level the playing field for retailers and wholesalers alike.

“The code should apply to all major retailers operating in Australia, including global retail giants such as Amazon and Costco, who have global revenues many times the size of Australian supermarkets, as well as to large Australia retailers such as Bunnings and Chemist Warehouse who also compete in grocery categories including everyday needs such as household products (eg cleaning), and personal care.

“We support the recommendation to retain fast and cost effective avenues for dispute resolution, for the benefit of suppliers, especially smaller ones,” the spokesperson said.

“Previous changes to the code, particularly the introduction of the informal complaints mechanism, have seen an increase in contact between the Woolworths Independent Code Arbiter and suppliers. This means issues can be promptly surfaced, investigated and addressed, while minimising any concern on the part of suppliers that their commercial relationships may be impacted.”

“In addition, we have published our Trade Partner Integrity Policy which makes clear Woolworths will not tolerate any reprisal against a Trade Partner for making a complaint under the Grocery Code. This is closely monitored by Woolworths Supermarkets senior management.”

Click here to read the full Woolworths Group response to the interim report and here to read Woolworths submission to the review.

To read Dr Emerson’s full media statement today click here. To access the interim report and to make a submission click here.