For some time there have been concerns about imbalance in the relationship between the major Australian supermarkets and their suppliers. Coles, Woolworths and the Australian Food and Grocery Council have released a draft Food and Grocery Code of Conduct (Code), which is aimed at improving the interactions between suppliers and those retailers to whom the Code would apply.
The Government and the Australian Competition and Consumer Commission will now analyse the draft Code before putting it out for public consultation, which will allow other stakeholders to also provide input.
The Code (as presently drafted) would only apply to retailers who have voluntarily agreed in writing to be bound by it. As Coles and Woolworths (along with the Australian Food and Grocery Council) have released the draft of the Code, it would appear that at this stage Coles and Woolworths may be intending to adopt and adhere to the Code.
There has been speculation as to whether the Code might become a prescribed industry code under the Competition and Consumer Act 2010 (Cth). However, this is yet to be clarified.
The Code’s Purposes
The Code states that its purposes are to:
- help to regulate standards of business conduct in the food and grocery supply chain and to build and sustain trust and co-operation;
- ensure transparency and certainty in commercial transactions in the grocery supply chain and to minimise disputes arising from a lack of certainty in respect of the commercial terms agreed between the parties;
- provide an effective, fair and equitable dispute resolution process for raising and investigating complaints and resolving disputes arising from the commercial dealings between the parties or otherwise under this Code; and
- enable industry participants to monitor the operation and efficacy of the Code in an industry-wide roundtable.
The Code requires suppliers and retailers to have and maintain Grocery Supply Agreements and sets out specific requirements which must be met in those agreements. For instance under the Code, Grocery Supply Agreements must specify:
- that the retailer and supplier are to at all times deal with each other lawfully and in good faith. Dealings with suppliers are to be without duress and in recognition of the suppliers’ needs for certainty regarding the risks and costs of trading, particularly in relation to production, delivery and payment issues.
- the circumstances in which a Grocery Supply Agreement may be terminated; and
The Code also:
- prohibits a retailer from requiring a supplier to consent to variations of a Grocery Supply Agreement;
- prohibits a retailer from varying any Grocery Supply Agreement retrospectively and from demanding or requesting that a supplier consent to retrospective variations of any Grocery Supply Agreement;
- prohibits a retailer from requiring a supplier to make any payment in order to secure better positioning or an increase in their allocation of shelf space for its grocery products; and
- set out details for procedures in the event of shrinkage, waste and product quality and standard issues that are intended to prevent the supplier from being unfairly treated.
Further, the Code provides procedures for a supplier to utilise in the event of a dispute arising with a retailer to whom the Code applies. Suppliers would need to provide the retailer with sufficient particulars of:
- the complaint or dispute;
- the conduct that is the subject of that complaint or dispute; and
- the provisions of the Code that are alleged to have been breached and the remedy or relief that that Supplier is seeking, to enable the retailer to investigate, consider and respond to the complaint or dispute, subject to appropriate confidentiality protections. The Code contemplates that a retailer will appoint a Code Compliance Manager who must be independent of the retailer’s buying team. The Code Compliance Manager will deal with complaints in accordance with a written complaints handling procedure to be developed by the retailer.
Time will tell what impact the Code might have from the perspective of Australian agribusiness. It remains to be seen which retailers will adopt the Code and whether it may change from its present form in any material ways. It will also be interesting to see what penalties or sanctions (if any) a breach of the Code might have.
Trent Taylor, Partner
T: +61 7 3135 0668
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed above.