Competition and Consumer (Industry Codes-Food and Grocery) Regulation 2015: New Food and Grocery Suppliers Code

Tuesday 3 March 2015 @ 10.33 a.m. | Legal Research | Trade & Commerce

The Australian Competition and Consumer Commission (the ACCC) has welcomed the introduction of the Food and Grocery Code of Conduct (the Code), which was announced by the Hon Bruce Billson MP, Minister for Small Business.

The Code, which is contained in Schedule 1 to the Competition and Consumer (Industry Codes-Food and Grocery) Regulation 2015 (Cth) (SR 2015, No 16) came into operation on 3 March 2015.

The voluntary code prohibits specific types of unfair conduct by retailers and wholesalers in their dealings with suppliers and provides a clearer framework for these dealings. It complements existing protections for suppliers under the Competition and Consumer Act 2010 (Cth) (the Act), including the unconscionable conduct provisions.

Purpose of the Code

The purpose of the Code, according to the explanatory statement of the Regulation is to:

  • help to regulate standards of business conduct in the grocery supply chain and to build and sustain trust and cooperation throughout that chain;
  • 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 parties;
  • provide an effective, fair and equitable dispute resolution process for raising and investigating complaints and resolving disputes arising between retailers or wholesalers and suppliers; and
  • promote and support good faith in commercial dealings between retailers, wholesalers and suppliers.

It is in response to concerns raised in the public debate in recent years about the conduct of retailers (in particular, supermarkets) towards their suppliers, and has arisen out of an industry led response to these issues. In this sense, the Code aims to regulate commercial relations between retailers and wholesalers, on the one hand, and suppliers, on the other hand, to the extent that they are not regulated by other codes.

Protection for Suppliers

The Code includes several protections for suppliers. For example, it requires that grocery supply agreements must be in writing and include certain matters. The Code also prohibits retailers or wholesalers from engaging in certain conduct (for example, they cannot unilaterally or retrospectively vary a grocery supply agreement) unless certain exceptions apply.

In most cases, these exceptions will need to be provided for in the grocery supply agreement and are subject to a reasonableness test. The retailer or wholesaler will bear the onus of proving that the exception applies in circumstances where the supplier claims that the prohibited conduct has been engaged in.

Transparency and Clarity in Transactions

The Code aims to improve transparency and clarity in commercial transactions within the supply chain by, in effect, encouraging the parties to include upfront provisions in their grocery supply agreements about a number of aspects of their relationship. This should help increase certainty.

Importantly, the Code also requires retailers and wholesalers to deal lawfully and in good faith with suppliers, thus aiming to improve trust between the parties.

It also provides a number of dispute resolution avenues for a supplier to raise its concerns about a retailer or wholesaler, including internal and external mechanisms (such as mediation or arbitration). This should assist the parties to resolve their differences in a fair and equitable manner.

Reaction from the ACCC

The ACCC Chairman Rod Sims said:

“Businesses that supply groceries to major retailers and wholesalers will have extra protections under the new industry code.

The code also provides new powers for the ACCC. Once retailers and wholesalers sign up to the code, we will be able to enforce it and take court action for breaches. We will also be able to audit retailers and wholesalers to check that they are complying with the code.

Coles, Woolworths and the Australian Food and Grocery Council worked closely to develop the code. We expect these retailers will sign up to it shortly.

There can be a significant imbalance in bargaining power between suppliers and large grocery retailers and wholesalers. The code seeks to limit some of the conduct that was brought to the ACCC’s attention during our supermarket suppliers’ investigation.

The new code, together with the recent Court judgment that Coles acted unconscionably, makes it clear that no matter how much bargaining power a retailer holds, they must deal with their suppliers fairly.”

The ACCC has developed guidance material on the code, which is available at Food and Grocery Code of Conduct.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

New rights for food and grocery suppliers - ACCC Release MR 19/15

Competition and Consumer (Industry Codes-Food and Grocery) Regulation 2015 (Cth) (SR 2015, No 16) and Explanatory Statement available from TimeBase LawOne Service 

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