Small Business Minister Bruce Billson is calling on Coles and Woolworths, as well as Aldi and Metcash, to sign up to a supermarket supply code of conduct that is set to be enacted later this week.
Billson’s calls come after the Australian Competition and Consumer Commission took legal action against Coles in October of last year, alleging the supermarket giant engaged in unconscionable conduct against its suppliers.
The supermarket giant was accused of trying to broker deals with suppliers for “profit gaps” on a supplier’s goods, being the difference between the amount of profit Coles had wanted to make on those goods and the amount it had achieved.
Coles was also accused of trying to make suppliers pay Coles, both retrospectively and prospectively, for amounts it claimed as “waste” on a supplier’s goods which occurred after Coles had accepted the goods. Coles agreed to pay a $10 million penalty to resolve its ongoing court battles with the ACCC in December.
Against this background, Coles and Woolworths have joined with the Australian Food and Grocery Council in negotiating a voluntary code of conduct with the federal government.
In its final form, the code of conduct will seek to regulate standards of conduct in the supply chain, while building trust and cooperation between supermarkets and suppliers. It includes a dispute arbitration process and a full evaluation of its performance and effectiveness will be carried out in three years.
Bruce Billson told SmartCompany he hopes to see full industry participation, including from Coles, Woolworths, Aldi and Metcash.
“This is a significant and substantial step forward in ensuring egregious and unwelcome conduct in grocery supply arrangements isn’t repeated into the future,” Billson says.
“After a fully-engaged process of consultation, the code is finalised and good to go. It’s an opportunity for supermarkets to opt in, and once they opt in, it’s binding and overseen by the ACCC.”
“The regulation enactment process will be completed this week, and I urge [the major supermarket chains] to sign up at the earliest opportunity.”
Jos de Bruin, chief executive of independent supermarkets association Master Grocers Australia, told SmartCompany the code is between suppliers and large stores, and therefore independent supermarkets won’t directly be a party to it.
“However, we’ve been concerned about anti-competitive pricing pressure Coles and Woolworths have been applying to extract the maximum possible discount from suppliers,” de Bruin says.
“My belief is that if the code is not enforced, then it’s not worth the paper it’s written on. And likewise, if the big supermarkets can just opt in and opt out when they like, it’s not going to make much of a difference.”
According to de Bruin, smaller retailers and suppliers have limited access to the market. Meanwhile, Coles and Woolworths are penetrating further into rural and regional areas, putting more pressure on local retailers and suppliers.
“For suppliers, one decision to not go ahead with a promotion or not carry a product can put them out of business. That’s something we shouldn’t see in this country,” he says.
Coles declined to provide a comment about the code, while no response was received from Woolworths prior to publication.