ACCC concerned over implementation of Food and Grocery code

The Australian Competition and Consumer Commission is investigating reports about the approach supermarket retailers are taking to implement the Food and Grocery Code of Conduct (Code).

ACCC Chairman Rod Sims said, “The aim of the Code is to redress the imbalance in bargaining power that can exist between suppliers and large grocery retailers by prohibiting certain types of unfair conduct”.

“The Code imposes a duty to deal with suppliers in good faith and we are concerned by reports we have received from suppliers that suggest that some retailers have not got off to a good start when it comes to implementing the Code,” Mr Sims said.

“The ACCC has concerns as to the manner in which some retailers, in particular Woolworths and Aldi, are presenting new Grocery Supply Agreements (GSAs), which might give the impression that the supplier is not able to negotiate the terms of the GSA.”

“The ACCC is also concerned about the low level of detail provided in some GSAs about the circumstances in which certain payments may arise.”

The Code sets out a number of prohibitions on, for example, requiring a payment for wastage that occurs at the premises of the retailer. While it is possible for retailers and suppliers to opt out of such prohibitions, this can only occur if the opt outs are agreed, if the agreement sets out the circumstances in which the opt out applies and if the payment is reasonable in the circumstances.

“One of the purposes of the Code is to provide certainty to suppliers, who are often in a much weaker bargaining position when dealing with retailers. In order to provide that certainty, the ACCC expects retailers to set out the circumstances in which they will seek payments from suppliers,” Mr Sims said.

The Code requires that retailers offer code-compliant GSAs. Suppliers should not feel compelled to sign these agreements and should seek advice before signing them. In particular, the Code will confer protections on suppliers 12 months after a retailer has signed up to the Code, regardless of whether a supplier has accepted a code-compliant GSA.

The ACCC said it has written to retailers about the manner in which they purport to be giving effect to the Code. The retailers have responded providing their new GSAs and the correspondence they have sent to suppliers offering the new GSAs. 

The said ACCC said it will continue to monitor compliance with the code.