Grocery Code faces its critics
NOT everyone is impressed by the new Food and Grocery Industry Code of Conduct’s capacity to hold big retailers to account.
Small Business Minister Bruce Billson announced the Code’s tabling at Parliament House in Canberra on Monday, with Australian Food and Grocery Council (AFGC) CEO Gary Dawson.
Development started in 2011 via talks between the government, supermarkets, the National Farmers Federation (NFF) and the AFGC amid concerns about acts of market power abuse in the retail supply chain.
But the NFF pulled out of the development process prior to the 2013 federal election demanding a compulsory Code of Conduct rather than a voluntary one.
The new Code is designed with specific focus on remedying strained supplier relations with the dominant retail duopoly Coles and Woolworths.
A consultation paper was released last year to help ensure the Code complied with powers within the Competition and Consumer Act 2010.
Consumers a beneficiary
Mr Billson said the new Code came into force on Tuesday and would improve the supply chain dispute resolution process.
He said the two big supermarkets had themselves recognised some “bumper rails” are needed on their conduct and “special care given to the immense market power and presence that they have in our economy”.
But he said consumers are “unquestionably” a net beneficiary of the Code which would be “a very substantial step forward in an area of commercial dealings that has drawn an awful lot of attention”.
“Where suppliers are not confident, are not seeing a predictable commercial relationship, feel that their interests are not being aligned with the interests of the supermarket chains – that is bad news for the Australian economy, for the supplier and consumers,” he said.
“It acts as a chill on investment, on product innovation, on the choice and value that Australian consumers are looking for.
“A grocery supply Code of Conduct will bind the conduct of those that agree to be bound by it to ensure that there is safe, healthy, mutual, respectful relationships with their suppliers.
“That will give us a thriving and vibrant grocery supply sector that is good for our economy, that is good for consumers and that is good for the ongoing relationship of those suppliers that have a very heavy dependence on the supermarkets that they supply to.”
Mr Dawson said the Code would make a real difference in the market and was essentially about ensuring suppliers “get a fair go and consumers get the benefit of a vibrant, dynamic, competitive market”.
“So for both consumers and suppliers it is critical to ensure that this market operates effectively,” he said.
Not ‘adequate’: Canavan
However, Queensland Nationals Senator Matthew Canavan said the Code wasn’t strong enough to effectively control the supermarket duopoly.
He said legal action taken in the Federal Court last year found that, “Coles’ practices, demands and threats were deliberate, orchestrated and relentless”.
He said the judge also found the penalties that could be imposed for this misbehaviour were “inadequate”.
“Given that the Code includes no penalties for breaching it, it’s not an adequate response, on its own, to the misconduct of the major supermarket chains in the last few years,” he said.
“A stronger response is needed including stronger competition laws from the Harper (competition) review and easier access to justice for small businesses.
“I have also argued for a divestiture power that can impose the ultimate fine on companies that engage in serious and repeated misconduct.
“We should impose tougher penalties on those that do the wrong thing, not just more red tape on the entire industry.”
‘Constructive step’: NFF
NFF CEO Simon Talbot said while the NFF had maintained support for a mandatory, binding Code, the voluntary prescribed Code was “a constructive step towards addressing the issues of concern to the farm sector”.
“The proof of this pudding will be in the eating – we will be monitoring how the initiative will work in practice,” he said.
“The key issue for farmers is ensuring that there is transparency and equity right across the agricultural supply chain from saleyards to supermarkets.
“The development of this Code is one component in addressing these concerns.
“Another is the government’s review of competition legislation – the Harper Review – where the farm sector has outlined its views on misuse of market power and anti-competitive behaviour across the supply chain.”
Mr Talbot said to be effective, the Code must also include a commitment from all major retailers “and we hope that support will be forthcoming”.
Govt may ‘escalate’ code to compulsory
However, Mr Billson said he’d been encouraged by the positive response of all the major supermarket chains throughout the Code’s development.
He said there was “no good reason whatsoever why those supermarket chains would not move quickly now to signal their commitment to the Code”.
Having made that decision they are then bound by the Code and it will be overseen by the Australian Competition and Consumer Commission (ACCC), he said.
“If we cannot get to that point, I have made it clear that the government is prepared to escalate the Code to one that forces their participation,” he said.
“I do not think that is necessary (and) would be at odds with the spirit of the discussions to date and the indications of support that I have received.
“I am now calling on those supermarket chains to follow through on those words, to advise the ACCC that they agree to be bound by the Code and we can get on with what is a very substantial improvement in the operating arrangements within the grocery supply sector.”
Mr Billson said he’d indicated to the supermarkets he wanted them to sign up to the Code “sooner rather than later” but, “We have not nailed a date”.
Mr Dawson said the major supermarket chains had been involved in the Code’s development from the start which was one of its strengths.
“Notwithstanding that, it is a strong, enforceable Code that does address the pressure points, does address the areas of friction that have caused such angst in those trading relationships over recent years,” he said.
“We think it’s a good balance.
“It is minimal effective regulation, it is light-touch regulation consistent with the government’s view, consistent with the industry’s view and that is one of the real strengths of the Code.”
Senate test ahead
Mr Billson acknowledged the National Party had supported a mandatory Code but said he’d explained its final iteration was an opt-in binding Code which had passed cabinet.
“I explained this as an opt-in binding code and the differences in that have been appreciated and they have also recognised that we have got work to do on the Horticulture Code which is really a primary focus for their interests,” he said.
Mr Billson said the only voluntary action a supermarket chain had to decide was whether to be bound by the Code.
He said once they’ve made an opt-in decision, it then becomes binding.
“It is mandatory and it is supervised by the Commission,” he said.
“That is an appropriate step, I think that is reasonable because we are putting new burdens and new disciplines on the supermarket chains and that is where we are saying, ‘you have come forward with this idea, we have supported you and now it is good to go, sign up and let us get on with it’.”
Mr Billson also said the government would be engaging with crossbench Senators to ensure the Code’s smooth passage through the Senate, given it was able be disallowed.
But he said he’d had no indication that any Senator has that intention to move a disallowance motion.
He said that was due to a number of reasons: firstly because it was an industry-led initiative that created minimum, effective regulation that was then “buttressed and strengthened by the Government through its consultation process”.
He said secondly, he’d not heard anybody suggest that the Code is not necessary.
“There is a clear public policy justification and in the lead up to the election we made it clear that we would support the efforts of industry to formulate this Code, given that industry knows best the detail and the nitty gritty of their commercial relationships,” he said.
“And then we would bring our view to the Code to strengthen it, to ensure that consumers are the focus and that their interests are protected.
“I am very optimistic that there will not be any move to disallow it in the Senate.”
Extracted in full from Farm Weekly.