A report commissioned by the government suggests that Australian supermarkets should incur fines up to A$10m ($6.6m) for “serious” infringements of the nation’s grocery code.
The interim review, released today (8 April) and spearheaded by ex-Small Businesses Minister, Dr Craig Emerson, has recommended that the Food and Grocery Code of Conduct become obligatory.
The report emphasises the necessity of enforceable regulations to address the “heavy imbalance in market power” observed between major Australian grocers – namely Woolworths, Coles, Metcash, and Aldi – and their suppliers.
Dr Emerson criticised the current voluntary code, stating, “The voluntary code of conduct has no penalties, leaving the competition watchdog chained up on the back porch.”
He proposed that the Australian Competition & Consumer Commission (ACCC) should oversee the mandatory code, endowed by Parliament with the authority to impose fines up to A$10m.
Such penalties could also amount to 10% of a grocer’s annual turnover “or three times the benefit it gained from the breach, whichever is greatest,” according to the review.
For less severe breaches, a fine of “up to 600 penalty units” amounting to A$187,800 is suggested.
Additionally, Dr Emerson has called for “a new mechanism for making confidential complaints to the ACCC” to support suppliers apprehensive about potential retaliation from supermarkets.
He argued that a mandatory code would also advantage consumers by providing “greater choice and better prices by enabling suppliers to innovate and invest in modern equipment to provide higher-quality products at lower cost.”
The National Farmers Federation has expressed its approval of the recommendations, with President David Jochinke stating that the suggested penalties “should send a strong message to retailers that the code now has teeth”.
Despite concerns that smaller suppliers might not afford “a lengthy ACCC court action” in the event of a code violation, Dr Emerson highlighted the possibility of “replicating options for independent mediation and arbitration that are used in other industry codes” as a less costly alternative.
Stakeholders have been given until the end of the month to provide feedback on the interim review, with a final report expected to be presented to the government by June’s end.
This push for a compulsory grocery code is concurrent with the ACCC initiating a pricing inquiry into the Australian supermarket sector earlier this year.
This extensive year-long investigation will scrutinise “the pricing practices of the supermarkets and the relationship between wholesale, including farmgate and retail prices”, revisiting the dynamics since the last review in 2008.
The inquiry was launched following an announcement by the Australian government that the Greens party would probe alleged price exploitation by leading retailers Coles and Woolworths.