ACCC Chairman calls for enforceability to be addressed in proposed grocery code

Posted by AFN Staff Writers on 1st October 2014
ACCC Chairman calls for enforceability to be addressed in proposed grocery code
ACCC Chairman calls for enforceability to be addressed in proposed grocery code

In welcoming industry efforts to develop a code of conduct to address unfair practices in the grocery sector, the Australian Competition and Consumer Commission called for issues around enforceability and coverage to be addressed before a conclusion is reached.

Addressing the Australian Food and Grocery Council’s Industry Leaders Forum in Canberra, ACCC Chairman Rod Sims said a code of conduct that provides clear rights and legally enforceable norms of conduct would be of considerable assistance to food and grocery industry participants.

“However, many of the protections of the proposed Code are qualified and retailers and suppliers are able to agree to ‘contract out’ of Code provisions,” Mr Sims said. “This raises an issue of whether the Code will address the problems which industry has identified if norms of conduct in the Code are able to be traded away, rather than always enforceable,” he said.

Mr Sims said that Australian suppliers had raised concerns relating to the “unfair transfer of risk from supermarkets to suppliers, and of unilateral changes to the terms of trade by supermarkets such that certainty of contract was lost”.

“Earlier this year, following an in-depth investigation, we took court action against Coles for alleged unconscionable conduct towards suppliers in relation to its Active Retail Collaboration (ARC) program,” Mr Sims said. “The ACCC alleges that Coles used undue pressure and unfair tactics in negotiating with suppliers, provided misleading information and took advantage of its superior bargaining position, so that its overall conduct was in all the circumstances unconscionable,” he said.

The matter is still before the court.

Strategy to remove competition barriers welcomed

Mr Sims also backed recent comments made by the Chairman of the Productivity Commission that Australia should stick with its successful strategy of favouring the many over the few by focusing on removing barriers to competition generally, rather than pursuing policies that favour particular sectors.

“I agree with him completely,” Mr Sims said. “So, it seems, does the Harper Panel review. We strongly agree with the review panel that there is a need to reinvigorate Australia’s competition policy, and ensure that it evolves,” he said.

Mr Sims welcomed the Harper Competition Review Draft Report and discussed proposed areas of microeconomic reform where the food and grocery sector stands to benefit.

Mr Sims also welcomed the review panel’s consideration of Australia’s competition laws.

“In doing so, they have clearly had regard to established international approaches to setting the appropriate boundaries of such laws,” Mr Sims said. “Australia’s competition laws are behind international best practice in important respects,” he said.

Mr Sims broadly welcomed the Panel’s recommendation on “concerted practices”, the misuse of market power, and in relation to merger assessment.

Credence claims focus

In reporting on the ACCC’s recent compliance and enforcement activities, Mr Sims listed outcomes in area of credence claims including beer, pork, honey and free-range eggs.

“When making promotional claims about food or grocery products, the ‘who’, ‘what’, ‘where’ and ‘how’ must be accurate,” Mr Sims said.

Mr Sims said the ACCC had said many outcomes in the past year, including:

  • Carlton & United Breweries (CUB) provided an undertaking to the ACCC in which it admitted that it was likely to have breached the Australian Consumer Law by using labelling that the ACCC was concerned represented that Byron Bay Pale Lager was brewed by a small brewer in Byron Bay, when it was in fact brewed by CUB in Warnervale.
  • Saskia Beer’s Barossa Farm Produce recently acknowledged that the labelling and promotion of her “The Black-Pig” smallgoods were likely to have breached the law because they represented that the pork used in The Black-Pig products was from heritage Berkshire pigs or other black pig breeds and that the pigs were free range, when this was not the case.
  • Basfoods recently paid penalties following the issue of three infringement notices by the ACCC, and provided an undertaking to the ACCC to address the ACCC’s concern, among other things, that Basfoods had represented that its ‘honey’ product was from Victoria, when it was from Turkey.
  • Last week the Federal Court handed down a $300,000 penalty against Pirovic Enterprises Pty Ltd after finding that its ‘free range’ egg claims were false or misleading.

Mr Sims said that when credence claims were misused “the damage is done in three ways”:

  • First, consumers are misled into paying more for a premium feature that doesn’t exist
  • Second, competitors who can legitimately make a credence claim unfairly lose their competitive advantage, and
  • Third, and perhaps most important, innovation suffers when consumers and businesses lose trust in the integrity of claims.

Mr Sims also provided an update on the carbon tax repeal, product safety and competition cases.