It was meant to fix up the grocery sector. So what does the supermarket code of conduct actually do?
Intense public scrutiny on supermarkets is nothing particularly new.
Nine years before the current focus on high prices and allegations of price gouging, a code of conduct was set up to address the market imbalance between major retailers like Woolworths and Coles and their suppliers.
Jump forward to the present day and issues clearly still remain.
A 2023 report found more than a third of Australian vegetable producers were considering leaving the industry within a year, in part due to price pressure from retailers and tightening margins, and the federal government has ordered a review of the code of conduct.
So what actually is the code of conduct, and does it work?
What is the supermarket code of conduct?
Introduced in 2015, the Food and Grocery Code of Conduct is an agreement that aims to improve business behaviour in the supermarket sector, particularly in regard to the relationships between retailers, wholesalers and their suppliers.
While suppliers are automatically covered by the code, it is completely voluntary for supermarkets.
Woolworths, Coles, Aldi and Metcalf (which owns IGA) have all signed up.
What do supermarkets have to do under the code?
There are a number of obligations for supermarkets under the code, including the underlying principle that they act in good faith when they deal with their suppliers – including during negotiations, when setting up supply agreements and when resolving disputes.
However, the code doesn’t actually define what “good faith” entails.
It instead outlines a number of factors that would be considered when judging whether something is in good faith, such as acting honestly and without retribution or duress.
Supermarkets also have to appoint their own code arbiter, who will investigate and propose solutions to disputes under the code.
However, a review of the code released last year heard that suppliers were concerned about the lack of independence of those arbiters, which in turn leads to a lack of formal complaints.
Since arbiters were introduced in 2021, they’ve received a grand total of five complaints across all four supermarkets, and Woolworths and Coles didn’t receive a single one between them in 2022-23.
What happens if supermarkets breach the code?
Suppliers can lodge formal complaints to the relevant arbiter if they feel a supermarket has breached the code in their dealings.
But this is where we arrive at one of the main criticisms of the code. Because it is voluntary, there are no real consequences for supermarkets that don’t meet their obligations.
This was acknowledged by Dr Craig Emerson, who said proper penalties in a mandatory code would improve supermarket behaviour after he was appointed to lead a review of the code in January.
“Critics point to the weak enforcement powers in a voluntary code,” he said in early February.
“A mandatory code with penalty provisions would likely incentivise greater compliance by supermarkets.
“Enforcement options could include infringement notices and court proceedings to impose financial penalties for non-compliance.”
Supermarkets, however, say the paltry number of complaints shows the relationships between them and suppliers are running smoothly.
Is the code going to change?
It might, but we don’t know for sure yet.
Emerson is due to deliver a report on the review by the end of June.
That will include a recommendation to the federal government on whether to amend the code – that is, keep it as a voluntary agreement but change some other elements – or remake it entirely to turn it into mandatory regulation.
The government will then have to choose whether or not to accept Emerson’s recommendation.
Prime Minister Anthony Albanese said when the review was launched that he “will not hesitate to take action” if it’s required.
