Balancing the Grocery Scales

To give farmers and their families ‘a fair go’, the Albanese Government on Monday has committed to adopting all eleven (11) recommendations of the Food and Grocery Code of Conduct Review 2023-24 (the Review).

Australia’s food and grocery industry is heavily concentrated, with Woolworths, Coles and Aldi, holding a market share of 75%. This means, for every $10 Australians spent on groceries, $6.50 is spent at Coles and Woolworths. As will be further examined by the ACCC’s Supermarkets Inquiry 2024-25, this significant market share creates the potential for abuse.

By way of example, as suppliers have little choice but to sell to the major three to get their products into the market, and as such, they have little choice but to accept whatever sale price they are offered. Additionally, small suppliers noted that they feared retribution from supermarkets if they raised concerns or exercised their rights under the Code.

 Source: Independent Review of the Food and Grocery Code of Conduct, p20

Created in 2015, the Food and Grocery Code of Conduct (the Code) was established to address such harmful practices in the grocery industry by setting minimum standards for retail and wholesale signatories. However, the Code is completely voluntary, with little to no genuine penalties for violations.

In January of this year, the Albanese Government tasked former Labor Minister the Hon Dr Craig Emerson with reviewing the Code. Essentially, the Review found that the existing Code was failing to address the power imbalance between supermarkets and their suppliers.

The amendments to be adopted by the Government include heavy penalties for deliberate or careless breaches of the Code. This includes penalties for the more harmful breaches of the Code being the greatest fine of: $10m, three times the benefit gained from the contravening conduct, or 10% of turnover from the preceding 12 months. Additionally, where a retailer has an annual revenue of more than $5bn, the Code will become mandatory (this includes Coles, Woolworths, ALDI, and Metcash). A likely possibility, Costco and Amazon may also face a mandatory code if they pass the threshold. Non-grocery stores such as Bunnings, Chemist Warehouse and Dan Murphy’s are not covered by the Code. The Government will also create an anonymous complaints and reporting mechanism with the ACCC.

The jury is still out on whether the changes will reduce prices for ordinary customers. Dr Emerson has stated that the amendments will result in suppliers competing at lower prices. Whilst Treasurer Dr Jim Chalmers agrees that he expects shoppers will see lower prices, he expressed that the changers were primarily about giving suppliers a ‘fair go’.

Implementing these recommendations will require changes to regulations and the Competition and Consumer Act 2010 (Cth). The Coalition has previously indicated support for a mandatory Code. Notably, Nationals leader David Littleproud said the Coalition would soon introduce its own competition policy.

29 June 2024 | Authored by Connor Andreatidis, Consultant, Precision Public Affairs

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