The Food and Grocery Code of Conduct (the Code) regulates the conduct of supermarket retailers and wholesales that have agreed to be bound by the code in their dealings with supplies.

It’s currently being reviewed by Professor Graeme Samuel AC to ensure that it is working effectively as a prescribed voluntary code. The terms of reference for this review include not only current compliance and whether the Code working effectively, but also how it should be handled in future – including if it should become mandatory.

At the recent Food and Grocery Australia 2018 conference held in Melbourne, Professor Samuel presented indicative findings from the review’s initial stages of consultation.

While the review hopes to release its draft report by mid-June 2018, and we encourage anyone who’s interested to read Professor Samuel’s full remarks posted online, we’ve also excerpted some of his statements on key areas below.

After the draft report is released, there’ll be further public consultation, so keep an eye on the Weekly Update or the review’s website for more information!

This post appeared in the AUSVEG Weekly Update published 12 June 2018. Subscribe to the Update using our online form to receive the latest industry news in your inbox every week!

Indicative findings from the consultation process of the Food and Grocery Code of Conduct Review

An enhanced good faith provision

I will be recommending that the Code be amended to enhance the provision on good faith.

[…]

The question of fairness can’t be considered in isolation, it needs to consider all the relevant circumstances of the suppliers – including for example the supplier’s size, nature of their business and production pipeline.

For example, a retailer can give a supplier a month’s notice they are cancelling an order and tick all of the boxes in the Code.

But the backstory may be that the supplier has scrambled to pay for an overseas shipment to meet the retailer’s order and a change at the last minute will spell disaster for them. Clearly, that’s not fair for the supplier.

The new good faith provision will allow the question of fairness to be considered in the context of the full story.

Penalties under the Code

I have received a few calls for penalties to be included in the Code. One of the most annoying facets of fines is that they do not remedy the party affected by bad behaviour. I don’t want to increase the government coffers – I want to ensure that suppliers who have a genuine case can get compensation from retailers that do the wrong thing.

The review is going to look seriously at how this can be implemented and at least cost to those within the Code.

Making the Code mandatory

I might note that other major industry participants, including new entrants should also consider it appropriate that they sign up to the Code – in fairness and to avoid the necessity of a mandatory Code, which may not need to be all embracing of the whole industry, but be targeted to the recalcitrants who do not see the wisdom of voluntary adoption.

[…]

As I have indicated, the alternative is to proceed down the mandatory code route – indeed it might involve a targeted mandatory Code directed solely at recalcitrant industry operators. I don’t think more Government regulation in this sector is in anyone’s interest.

A mandatory code could also involve greater compliance costs – it’s just not something that will be positive for the industry – signatories already spend considerable resources on compliance with the current code – we don’t want to increase this burden with a mandatory one.

Loopholes

[T]here is a need to change some provisions of the Code. In particular, I’ll be looking closely at the delisting requirements to ensure that suppliers are being delisted for genuine commercial reasons and not as punishment for making a complaint or driving a hard bargain.

Some of these are a no brainer – contract variations that have retrospective effect have been an endangered species in this business – but it’s time to get rid of it completely. We’ll work through these with all parties to ensure that we get a fair deal that sets some clear expectations.

Price rises

I wanted to also discuss the current nature of price rises within the industry. It has been a common theme across almost all consultation meetings and it sounds like absolute nonsense. This current process whereby as a supplier to a major retailer – you need to justify your price rise – in some instances partaking in a laborious exercise of providing all of your information before a price rise could be considered.

I don’t know why suppliers would participate in this process. Suppliers should only need to justify their price to consumers, not the retailers.

[…]

I am not sure whether it is for the Code to solve this issue – maybe it’s related to the vertical integration of some retailers. Maybe it’s something that the ACCC will need to take a further look at. I think that the consumers would understand that some products do need to go up in price eventually.

My concern is that retailers may knock back a price rise from suppliers, but may be quite comfortable with increasing the retail price without passing anything back. Shoppers would be right to question the fairness behind something like that.

All excerpts above have been taken from the online version of the presentation given by Professor Samuel available here.