The Australian federal government announced on Monday its intention to enforce a mandatory industry code of conduct for major supermarket chains, threatening fines of up to 10% of annual turnover for non-compliance. This move targets concerns that suppliers, including farmers, have been unfairly pressured on pricing by dominant retailers.
Currently, the voluntary code of conduct will become mandatory for grocers with more than A$5 billion ($3.3 billion) in annual revenue, encompassing Woolworths (WOW.AX), Coles (COL.AX), ALDI, and wholesaler Metcash (MTS.AX). These companies dominate Australia’s grocery sector, with Woolworths alone reporting A$48 billion in Australian food sales in 2023, and Coles with A$37 billion.
The decision follows a report by former competition minister Craig Emerson, which highlighted that the existing voluntary code failed to address the power imbalance between supermarkets and their suppliers. The revised code primarily focuses on ensuring fair dealings between supermarkets and their suppliers.
In a joint statement, Treasurer Jim Chalmers, agriculture minister Murray Watt, and competition minister Andrew Leigh emphasized the importance of fairness for families and farmers. They underscored the need to ensure a balanced grocery sector where suppliers can operate sustainably.
Representatives from Woolworths and Coles indicated they would consider the report’s recommendations and government response, affirming their commitment to supporting a sustainable grocery industry. ALDI Australia expressed support for making the code mandatory and is reviewing the final recommendations, while Metcash reiterated its commitment to the code and ongoing collaboration with suppliers.
The National Farmers Federation welcomed the government’s move, stating that it would empower suppliers, particularly farmers, to address issues of market power abuse by large retailers. The federation emphasized the necessity for strong deterrents within the code to influence behavior across the supply chain positively.
The federal government aims to prioritize passing legislation to enforce the mandatory code swiftly. Concurrently, a separate inquiry by the Australian Competition and Consumer Commission into consumer pricing in the grocery sector is scheduled to report its findings in February 2025, reflecting ongoing scrutiny of Australia’s highly concentrated supermarket industry.
