There have been “far too many instances of large firms racing to the bottom” in the quest for supermarket dominance, says Michael Schaper, deputy chair of the Australian Competition and Consumer Commission.
“There is no doubt the large scale retail market is becoming increasingly competitive,” Schaper told SmartCompany yesterday.
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“It is important there are some commonly accepted practices otherwise there will be a race to the bottom. There have been far too many instances of large firms racing to the bottom already, so if this puts a floor under it, it will be a good thing.”
Stopping this “race to the bottom” is the purpose of the Food and Grocery Code of Conduct, which came into effect in June.
The competition watchdog is this week spreading the word about the code among small grocery suppliers.
An initiative that has been spearheaded by small business minister Bruce Billson, the Food and Grocery Code of Conduct protects grocery suppliers from retailers and wholesalers trying to change contracts mid-term, commits supermarkets to engage in good faith dealings with suppliers and establishes effective dispute resolution boundaries.
The voluntary code was developed in consultation with the major supermarket chains and currently has four signatories: Coles, Woolworths, Aldi and a smaller grocery chain, About Life.
“The first organisation to sign on was About Life, which has lead the way,” Schaper says.
“A little chain led the way.”
The code applies only to suppliers of those four chains and Schaper is keen to make sure these suppliers have read the code and understand the protections available to then.
The ACCC will administer the code and suppliers who are concerned about their dealings with the signatories can enter into confidential discussions with the regulator.
While the code has been operating for a number of months, Schaper says he is not aware of any grocer suppliers yet contacting the ACCC with concerns about their dealings with the supermarket chains.
Schaper says more retailers, including Metcash, signing on to the code is “a possibility”.
Metcash, which owns IGA and Foodland among other outlets, has previously indicated it supports the code and would test it on a trial basis.
And while Schaper says the code is not targeted at any specific group of grocery suppliers, he says those in the horticultural sector should be aware that the grocery code sits alongside the existing horticultural code of conduct, which does not cover their dealings with the supermarket chains.
“There are two codes but they are complementary. They deal with different situations,” he says.
Schaper says there should be no doubts among members of the grocery sector that the ACCC is willing to pursue any large companies that engage in unfair practices.
“I don’t think there is any doubt over the last year the commission has shown our willingness to take action against retailers over their practices with smaller firms,” he says, referencing the ACCC’s legal action against Coles in relation to its Active Retail Collaboration program.
“If having this code is another way in which retailers embed much better and fairer treatment of suppliers then it’s a step forward,” Schaper says.
“We need to set a new standard for the industry.”