Metcash amends supplier agreements at request of ACCC

Posted by Daniel Palmer on 5th February 2009

Metcash, the major grocery wholesaler and distributor to independent supermarkets, will amend its supplier agreements in response to concerns raised in the Report of the ACCC inquiry into the competitiveness of retail prices for standard groceries.

The report, issued in August last year, expressed the view that Metcash’s arrangements with suppliers could make direct dealing between suppliers and independent retailers economically unattractive and enable Metcash to inhibit competitive supply.

The Australian Competition and Consumer Commission was specifically concerned with arrangements where suppliers of Metcash, supplying direct to Metcash’s customers had to pay rebates to Metcash for products stocked by IGA>D, Metcash’s distribution division. Suppliers who supplied direct to customers of Metcash had to provide details of such direct supply on a monthly basis.

The competition watchdog reported they were worried that such arrangements could act as a disincentive for suppliers to supply direct to retailers by making it economically unattractive to supply direct, and, in turn, that those retailers would then lack choice of supplier. The ACCC was also concerned that this discouraged direct dealings between suppliers and independent retailers by increasing the cost of direct supply and/or reducing the discounts that might otherwise be made available to the retailer. As a result, the ACCC decided to examine whether these arrangements breached the anti-competitive conduct provisions of the Trade Practices Act 1974 in particular sections 45, 46 and 47.

To alleviate these concerns, Metcash has advised the ACCC that it will:

* amend its standard agreement so that all new agreements with suppliers would not contain the requirement to report direct deliveries to Metcash
* advise suppliers Metcash waived the requirement and would not enforce it, and
* vary existing agreements by deleting the requirement from each agreement.

“The ACCC is, however, continuing to make inquiries in relation to Metcash’s arrangements with its retailers, including arrangements where retailers are required to purchase all of their products or certain percentages of their products from Metcash,” they noted in a statement.

The ACCC is consequently requesting further information from any retailers who feel restricted by purchasing from Metcash and whether they are able to source products from elsewhere. Any retailer who wants to provide information should contact the ACCC’s Infocentre on 1300 302 502, the competition watchdog advised.