There are 21 days left to have your say on this discussion paper. Submissions close 30 April 2024.
Go to https://treasury.gov.au/consultation/c2024-510813 for details.
Submissions to the Interim Report will assist Dr Emerson in preparing a Final Report, which will be provided to the Government by 30 June 2024
IndependentReview of the Food and Grocery Code of Conduct – Interim Report, 5 April 2024, excerpts:
PAGE 1
A heavy imbalance in market power between suppliers and supermarkets in Australia’s heavily concentrated supermarket industry necessitates an enforceable code of conduct. An effective code of conduct would benefit smaller suppliers and consumers by enabling suppliers to innovate and invest in modern equipment to provide better products at lower cost.
The existing Food and Grocery Code of Conduct (the Code) is not effective. It contains no penalties for breaches and supermarkets can opt out of important provisions by overriding them in their grocery supply agreements.......
PAGES 2-3
The Review has held more than 40 meetings, as well as receiving 56 submissions in response to the Consultation Paper that was released on 5 February 2024. In addition, 2 roundtables were co-convened by the Review with the Minister for Agriculture, Fisheries and Forestry, Senator the Hon Murray Watt, involving members of the National Famers’ Federation, various primary producer representative groups, meat and other agricultural processors, and the trade union movement.
The terms of reference for the Review ask whether the Food and Grocery Code (the Code) should be retained as a voluntary code, made mandatory or scrapped altogether. The Review has found that the heavy imbalance in market power between the major supermarkets and their smaller suppliers necessitates the continuation of a Food and Grocery Code of Conduct in some form. The Code should not be scrapped.
A mandatory Code that is the best of both worlds
The Review’s central, firm recommendation is that the voluntary Code be made mandatory and subject to enforcement by the ACCC. The mandatory Code should apply to all large supermarkets that meet an annual revenue threshold of $5 billion (indexed for inflation). Revenue would be in respect of carrying on business as a grocery ‘retailer’ or ‘wholesaler’ (as defined in the voluntary Code). At this stage this would capture Coles, Woolworths, ALDI and Metcash. All suppliers to these businesses would be covered by the Code.....
PAGE 7
Firm recommendations
Firm recommendations of the Interim Report are as follows and will not change. [my yellow highlighting]
• Recommendation 1: The Food and Grocery Code of Conduct should be made mandatory.
• Recommendation 2: All supermarkets that meet an annual revenue threshold of $5 billion (indexed for inflation) should be subject to the mandatory Code. Revenue should be in respect of carrying on business as a ‘retailer’ or ‘wholesaler’ (as defined in the voluntary Code). All suppliers should be automatically covered.
• Recommendation 3: The Code should place greater emphasis on addressing the fear of retribution. This can be achieved by including protection against retribution in the purpose of the Code and by prohibiting any conduct that constitutes retribution against a supplier.
• Recommendation 4: As part of their obligation to act in good faith, supermarkets covered by the mandatory Code should ensure that any incentive schemes and payments that apply to their buying teams and category managers are consistent with the purpose of the Code.
• Recommendation 5: To guard against any possible retribution, supermarkets covered by the mandatory Code should have systems in place for senior managers to monitor the commercial decisions made by their buying teams and category managers in respect of a supplier who has pursued a complaint through mediation or arbitration.
• Recommendation 6: A complaints mechanism should be established to enable suppliers and any other market participants to raise issues directly and confidentially with the ACCC.
• Recommendation 8: A Code Supervisor (previously the Code Reviewer) should produce annual reports on disputes and on the results of the confidential supplier surveys.
• Recommendation 10: Penalties for non-compliance should apply, with penalties for more harmful breaches of the Code being the greatest of $10 million, 10 per cent of turnover, or 3 times the benefit gained from the contravening conduct. Penalties for more minor breaches would be 600 penalty units ($187,800 at present)....
PAGES 70-71
Facilitating stronger competition in grocery retailing
Greater competition in grocery retailing and wholesaling would not only improve the negotiating position of smaller suppliers, but it would also deliver better prices to consumers. From the perspective of consumers and the economy at large, competition is good, but more competition is even better.
To address wider recommendations is very important for [the] wider advance in policy reform since the current Government is appropriately establishing many reviews and inquiries in many individual areas. But it lacks a proper mechanism devoted to adding up and integrating the results. [Professor Withers and Professor McEwin (Australian National University), Submission to the Consultation Paper, 23 February 2024, p1]
A reformed Food and Grocery Code is one of several cost-of-living and pro-competition inquiries and measures being undertaken at present. Other inquiries and initiatives are outlined briefly below.
ACCC Supermarket Inquiry 2024-25
On 1 February 2024, the Treasurer, the Hon Dr Jim Chalmers MP, directed the ACCC to undertake a 12-month price inquiry into the supermarket sector to ensure Australians are paying a fair price for their everyday groceries.
The inquiry will examine the competitiveness of retail prices for everyday groceries. Matters to be considered by the inquiry include, but are not limited to:
• The structure of the supermarket industry at the supply, wholesale and retail levels;
• Competition in the industry and how it has changed since 2008, including the growth of online
shopping;
• The competitiveness of small and independent retailers, including in regional and remote
areas;
• The pricing practices of supermarkets;
• Factors influencing prices along the supply chain, including the difference between farmgate
and supermarket prices;
• Any impediments to competitive pricing along the supply chain; and
• Other factors impacting competition, including loyalty programs and third-party discounts.
An issues paper has been published seeking views on the key issues the ACCC will consider in the inquiry. An Interim Report will be provided to the Government by 31 August 2024, with the Final Report due to be provided by 28 February 2025.....
The full 83 page interim report can be read and downloaded at:
https://treasury.gov.au/sites/default/files/2024-04/c2024-510813-ir.pdf
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