Supermarkets could face fines of up to A$10m for undercutting suppliers under new recommendations made in a review of the Australian Food and Grocery Code  

Supermarket fresh produce aisle

The code would apply to Coles, Woolworths, Aldi, and wholesaler Metcash

An interim report has been released as part of the Independent Review of the Food and Grocery Code of Conduct.

The report provides eight firm recommendations for improving the code, and a further three that are subject to stakeholder feedback.

Under the changes, the Australian Competition and Consumer Commission (ACCC) would be brought in to enforce the code providing fines of up to A$10m, 10 per cent of a supermarket’s annual turnover, or three times the benefit it gained from the breach.

“The existing Food and Grocery Code of Conduct is not effective,” said the independent reviewer of the Food and Grocery Code of Conduct, Craig Emerson in the report.

“It contains no penalties for breaches and supermarkets can opt out of important provisions by overriding them in their grocery supply agreements.

“I firmly recommend the code be made mandatory and apply to all supermarkets with annual revenues exceeding A$5bn.”

At present, this would apply to Coles, Woolworths, Aldi, and wholesaler Metcash.

Emerson also argued the code should be strengthened to better protect suppliers, as their fear of retribution has compromised its effectiveness.

The report said: “The Review has heard compelling evidence that these fears are real for most suppliers, especially smaller suppliers and act as a powerful deterrent to making formal complaints under the voluntary code”.

Since 2021, only six disputes have been initiated by suppliers and none has resulted in the awarding of compensation.

Under the new recommendations, the code would provide “avenues for suppliers to raise issues informally and confidentially, options for mediation and arbitration, and stronger protections for suppliers.”

The recommendations draw on submissions received to the consultation paper as well as more than 40 meetings including two round-tables co-convened by the Review with the minister for agriculture, fisheries and forestry, Murray Watt involving members of the National Famers’ Federation (NFF), various primary producer representative groups, and the trade union movement.

NFF president David Jochinke previously welcomed the appointment of Emerson to take the review forward but added there was still a long way to go to fix Australia’s competition issues.

“The code is failing farmers and we’ve said for a long time it should be made mandatory,” Jochinke said. “We need to get to the bottom of why there’s a growing gap between what farmers get paid and what produce is being sold for on supermarket shelves.

Interested parties are invited to comment on the consultation until 30 April 2024 ahead of Emerson’s final recommendations which will be presented at the end of June.