Coles, Woolies Agree to Voluntary Code
Wednesday 20 November 2013 @ 1.17 p.m. | Trade & Commerce
A new voluntary code of conduct governing retailer-supplier relationships has been signed onto by Woolworths and Coles reports the Sydney Morning Herald. The agreement with the Australian Food and Grocery Council was signed over the weekend following over 14 months of intermittent negotiations.
Caving to pressure from the suppliers Woolworths and Coles agreed to compromise on key issues such as protection of intellectual property and shrinkage that threatened to bring negotiations to a halt. Had negotiations been unsuccessful, the government would have imposed more bureaucratic measures such as a mandatory code.
The Agreement
Under the agreement the two grocery chains will be prohibited from using suppliers' intellectual property to cultivate private label products and will be restrained from retrospectively changing contract terms. Other changes include no longer allowing retailers to charge suppliers for products pilfered from supermarkets.
The retailers refused to agree to separate their buying operations for branded products away from private label buying, arguing that the idea was unfeasible as category buyers needed to take a holistic approach to categories.
Supplier Reaction
Suppliers are in strong support of the agreement, remarking that the voluntary code seemed to go further than the UK Grocery Code of Conduct in matters relating to private brands which were the key issues on the table during negotiations. Woolworths and Coles are not only obligated to sign the code, they must engage an internal compliance officer – detached from the buying teams to report every six months on company compliance with certain provisions. The documents must be signed off by a senior retail executive, ensuring that compliance with the code has senior level support within the company.
Once the code is in place and following a 12-month transition period, the code will apply to all new and existing grocery supply contracts. This means that suppliers will not have to renegotiate existing contracts at a possible disadvantage to them. The voluntary code of conduct is set to be given to the government this week for draft enabling legislation under competition and consumer laws which will enable the Australian Competition and Consumer Commission to oversee the scheme.
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