Mandatory option in Food and Grocery Code of Conduct review

Mandatory option in Food and Grocery Code of Conduct review


A review of the Food and Grocery Code of Conduct will consider whether the federal regulations should remain voluntary or become mandatory.


A REVIEW of the Food and Grocery Code of Conduct (Code) will consider whether the federal regulations should remain in voluntary form or become mandatory and therefore enforceable, with appropriate penalties like fines for non-compliance.

The National Farmers’ Federation has previously demanded the Code be mandatory, during the design phase - but promised to maintain a close watch on its progress and implementation of the voluntary version, when it started in 2015.

The Code is overseen by the Australian Competition and Consumer Commission (ACCC) under the Competition and Consumer Act, and was devised to try to protect farmers and suppliers from market power abuse by the major supermarkets, in the retail supply chain.

To date, Coles, Woolworths, Aldi and About Life supermarkets - which has seven stores in Sydney and one in Port Melbourne and promotes itself as an ethical food supplier where ‘food as medicine’ is a cornerstone philosophy - have all signed up to the Food and Grocery Code of Conduct.

Woolworths has previously urged rival retailers Costco and IGA to sign up to the Code and follow the lead of the major supermarkets.

Last week the federal government, through Assistant Minister to the Treasurer Michael Sukkar, announced the Code would be reviewed and released its terms of reference.

A final report is expected to be released to government within six months. - Michael Sukkar, Assistant Minister to the Treasurer

Former ACCC Chair and National Competition Council Professor Graeme Samuel will lead the review that’s required, under the prescribed legislation, to begin three years after the Code’s commencement.

A spokesperson for the Australian Food and Grocery Council said the Code’s establishment was one of the most “significant achievements” in delivering a “meaningful and enforceable regulation” that was driving “behavioural change and encouraging fair and effective competition across the supply chain”.

“We welcome the Code review which has been scheduled to occur since its implementation in 2015 and this provides a good opportunity to review its place in a highly dynamic, rapidly changing and highly competitive market,” the spokesperson said.

Mr Sukkar said the review was intended to ensure the Code was working effectively, as the first prescribed voluntary Code under the Competition and Consumer Act 2010.

He said the Code regulated the conduct of those supermarket retailers and wholesalers who have agreed to be bound by it, in their dealings with suppliers.

“The Food and Grocery Code of Conduct was introduced in 2015 to deal with certain commercial practices of supermarkets and wholesalers that were negatively affecting suppliers to the detriment of consumers,” he said.

“Public consultation will commence shortly and stakeholders are encouraged to engage with the review through the Treasury website.

“Consultation will be undertaken with a range of stakeholders - retailers, suppliers, farms, government, regulators, legal and international bodies - including in regional areas.

“A final report is expected to be released to government within six months.”

ACCC Commissioner and head of the competition watch dog’s Agricultural Enforcement and Engagement Unit Mick Keogh said the ACCC would be making a formal submission to the Code review but didn’t have a position as yet on whether it should remain voluntary or become mandatory.

Mr Keogh said it was one of several regulated industry codes the ACCC was responsible for, under the Competition Act, and most were subject to a “routine”, periodic review, as was the case with the Food and Grocery Code of Conduct.

He said voluntary codes had “considerable challenges” like being difficult to enforce but they also can be flexible and workable, if they have industry’s “good will”.

Mr Keogh said a recent review of the mandatory Horticulture Code of Conduct saw industry raise concerns the regulation wasn’t working effectively as it lacked compliance.

That led to its powers being strengthened to allow infringement notices to be imposed on individuals and businesses with fines of up to $54,000, if its provisions are breached.

The Food and Grocery Code of Conduct review’s terms of reference include looking at; the extent to which retailers and wholesalers have become bound by the Code; levels of compliance by retailers and wholesalers bound by the Code; whether the Code’s purposes are being met; the extent to which the Code assists in addressing any imbalances in the allocation of risks between retailers, wholesalers and suppliers; any further measures to improve the Code’s operation; and whether the Code should be mandatory or voluntary.

Mandatory Codes are generally viewed as being politically difficult to implement and met with resistance due to fears of imposing added red tape and regulation on industries like agriculture.

In contrast, voluntary codes are seen as a political compromise and starting point, where industry can or is given the opportunity to resolve challenging commercial issues like supply chain power imbalances, without government intervention.

The Food and Grocery Code of Conduct contains a mechanism for hearing complaints and disputes by suppliers where they can seek mediation or arbitration

While there are no financial penalties for breaching the Code, other remedies are available for the ACCC to pursue after investigation, including court-ordered injunctions, compensation for losses or damage caused by misconduct and contract variations.

Conduct that breaches the Code could also breach the unconscionable conduct provisions of the Australian Consumer Law, which carries penalties of up to $1.1 million per contravention, the ACCC says.

In its submission to the federal government’s Agricultural Competitiveness White Paper in 2014, Coles said it had has joined with Woolworths, and AFGC members, to develop and sign on to the voluntary Code of Conduct.

“The Code seeks to secure across the sector the benefits of robust competition, better value for consumers and fair and transparent dealings between retailers and suppliers,” it said.

“The Code, announced in November, 2013, enshrines a transparent set of principles for standards of conduct across the food industry supply chain, and provides for dispute settling procedures if disagreements arise.”

The Food and Grocery Code of Conduct Review can be found here.

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