Big penalties on the cards for supermarket code breaches

The independent reviewer, Dr Craig Emerson, made eight firm recommendations, including that the Code be made mandatory, with penalties of $10 million or more for serious breaches.

HEFTY fines for supermarket misbehaviour could soon be on the cards, according to the initial findings of a review into the Food and Grocery Code released on Monday.

The independent reviewer, Dr Craig Emerson, made eight firm recommendations, including that the Code be made mandatory, with penalties of $10 million or more for serious breaches.

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The Interim Report of the Review of the voluntary Food and Grocery Code of Conduct (the Code) makes a further three recommendations on which stakeholder views are sought.

The mandatory Code would be enforced by the competition watchdog, the Australian Competition and Consumer Commission (ACCC).

For serious breaches, the ACCC would be empowered by Parliament to seek penalties from the courts of up to $10 million, ten percent of a supermarket’s annual turnover, or three times the benefit it gained from the breach, whichever is greatest.

Penalties for less serious breaches would be up to 600 penalty units, which at present is $187,800.

Dr Emerson said making the code mandatory was essential to deal with the heavy imbalance in market power between the major players – Coles, Woolworths, ALDI, and Metcash – and their smaller suppliers.

“The voluntary Code of Conduct has no penalties, leaving the competition watchdog chained up on the back porch,” Dr Emerson said.

The Interim Report also makes firm recommendations to strengthen protections for suppliers against possible retribution from supermarkets.

“A new mechanism for making confidential complaints to the ACCC would be of great value to suppliers fearful of retribution from supermarkets if they made a complaint to them,” Dr Emerson said.

Dr Emerson’s support for making the Code mandatory was shared by the ACCC, former ACCC Chairs Rod Sims and Allan Fels, the National Farmers’ Federation, AUSVEG, Australian Dairy Farmers, the Australia Chicken Growers’ Council, Fresh Markets Australia, and other stakeholders.

Dr Emerson pointed out that getting a better deal for smaller suppliers was also in the interests of supermarket customers.

“An effective Code of Conduct would benefit consumers through greater choice and better prices by enabling suppliers to innovate and invest in modern equipment to provide higher‑quality products at lower cost,” he said.

NSW Farmers Vice President Rebecca Reardon said the report’s recommendations around the code could finally set the wheels in motion to address market power misuse by supermarket giants.

“For years, grocery giants have had near unfettered ability to use their market power against suppliers, with a lack of accountability or penalties for any unconscionable behaviour impacting the supply chain,” Mrs Reardon said.

“Having a mandatory Code of Conduct for our supermarkets and their suppliers with enforceable, meaningful penalties for its breach could make the world of difference when it comes to cracking down on the harmful practices of these super powers.

“Anti-competitive activity needs to be stopped in its tracks, and it’s nice to hear the Federal Government step up and admit the current Code is not good enough.”

However, Mrs Reardon said Dr Emerson’s failure to back divestiture powers as one of the tools in the toolbox to address harmful behaviour by supermarkets was disappointing.

“Australia has one of the most highly concentrated supermarket sectors in the world, and this lack of competition has enabled these superpowers to behave as they have,” Mrs Reardon said.

“We need a number of tools and reforms to address the issues at hand, and we have pointed to divestiture powers as one of these mechanisms that could in fact be very effective in busting supermarkets for unfair behaviour.

“Supermarkets have too much power, and too often, they are using it in a way that is hurting farmers and harming families.

“This market concentration is the core issue and the elephant in the room, which we need to address if we want to truly change the system.”

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