The Australian Government has released a consultation paper, ‘Improving Commercial Relationships in the Food and Grocery Sector‘, and the draft Food and Grocery Code of Conduct (the Grocery Code) for public consultation.

In November 2013, Coles, Woolworths and the Australian Food and Grocery Council (AFGC) provided their jointly developed Grocery Code to the Australian Government. The Grocery Code was subsequently redrafted to comply with the legislative framework under the Competition and Consumer Act 2010 (CCA).

The proposal brought forward by these industry proponents is for the Government to prescribe the Grocery Code as a voluntary industry Code under the CCA.  If a retailer agrees to be bound by the Grocery Code and is later found to have breached it, enforcement action can be taken under the CCA by the Australian Competition and Consumer Commission (ACCC) or by private action. There are a range of remedies for breaches of a prescribed industry code, including injunctions and compensation for damages.

The Australian Government said it welcomed this business-led response and that the proposed Grocery Code represented “an important step forward for the industry”. However, before Government decides to prescribe an industry code, it will undertake extensive public consultation and rigorous analysis to ensure the Grocery Code will be effective in establishing a minimum standard of conduct in the industry, and that its benefits outweigh the regulatory costs.

The consultation paper also represents the Government’s Early Assessment Regulation Impact Statement (RIS). The RIS process is part of the Government’s firm commitment towards better regulation that delivers net benefits for businesses and the community. The objective of the Early Assessment RIS is to inform the Government’s decision about how to proceed with the Grocery Code based on evidence and feedback from stakeholders. This will underpin the subsequent Final Assessment RIS, which will build on the consultation paper by discussing the results of the consultation process, the evidence that has been gathered and how the final conclusion is reached.

Both the Early and Final Assessment RIS will be published on the Office of Best Practice Regulation’s website.

From 6 August 2014, the Treasury is seeking feedback on the questions raised in the consultation paper.

Consultation draft important step in finalising Code of Conduct, AFGC

The release of the discussion paper by the Federal Government is an “integral part” of finalising a Food and Grocery Code of Conduct that provides greater transparency and certainty for food and grocery suppliers in their transactions with supermarkets, according to the Australian Food and Grocery Council (AFGC).

AFGC CEO Mr Gary Dawson said that the release of the discussion paper was an important step towards achieving a meaningful and enforceable Code that will improve the operation of one of the most dynamic and competitive sectors of the economy – the fast moving consumer goods sector.

“We congratulate the Government for progressing the Code as an industry-led solution to problems impacting on suppliers and consumers,” Mr Dawson said.

“The Food and Grocery Code establishes a clear set of principles relating to key aspects of trading relationships between retailers and suppliers and will provide greater certainty and clarity about dealings in the industry without adding unnecessary complexity or cost,” Mr Dawson said. “This consultation process is important in ensuring that the Code can be tabled in Parliament as a regulation under the Competition and Consumer Act2010 to give it real teeth,” he said.

Key aspects of the Code include:

• Tough restrictions on retrospective and unilateral variations to grocery supply agreements;
• Greater transparency on the basis of shelf allocation for branded and private label products;
• Recognition of the importance of intellectual property rights and confidentiality in driving innovation and investment in new products; and
• A low cost and fast track dispute resolution mechanism

Mr Dawson also welcomed the announcement by Coles that it will implement a Supplier Charter.

Farmers also welcome discussion paper

The National Farmers Federation (NFF) has also welcomed the Improving Commercial Relationships in the Food and Grocery Sector’ discussion paper and the draft Food and Grocery Code of Conduct (the Grocery Code) which was released for comment by the Federal Government.

‘While the NFF has a longstanding policy of supporting a mandatory Code of Conduct to address concerns between retailers and suppliers, this is an opportunity to review what is being put forward by the retailers and processors in the form of a prescribed code and identify any gaps that we see,” said Brent Finlay, NFF.

Mr Finlay said farmers needed an environment where they could be profitable and continue to invest and grow their businesses, and that to do this they need “transparency and certainty in commercial transactions between the parties in the supply chain”.

“We have said all along that we are not interested in window dressing,” Mr Finlay said. “Any mechanism put in place must be strong and independent enough to provide a balance to the commercial relationships and convey a level of confidence to the farm sector that any concerns can and will be addressed,” he said.

“There is no doubt that the opportunities for the agriculture sector in Australia are extremely positive,” Mr Finlay said. “While we will continue seeking growth in international markets, we want to ensure we have the right balance domestically as well and that relies on mutually beneficial relationships with retailers and processors,” he said.

“As part of the process going forward we need to ensure there is an effective mechanism in place and this includes a fair and equitable dispute resolution process for raising and investigating complaints and disputes arising from the commercial dealings between the farmers and other stakeholders in the supply chain,” Mr Finlay said.

“Farmers want to work co-operatively with the supply chain – we must all work together to achieve the best outcome for the consumers we all serve,” Mr Finlay said. “We look forward to reviewing the draft Prescribed Code and continuing to talk with government and retailers to make sure our concerns are addressed,” he said.

Making a Submission

Interested parties are invited to comment on the ‘Improving Commercial Relationships in the Food and Grocery Sector‘ consultation paper.

While submissions may be lodged electronically or by post, electronic lodgement is preferred. For accessibility reasons, please submit responses sent via email in a Word or RTF format. An additional PDF version may also be submitted.

All information (including name and address details) contained in submissions will be made available to the public on the Treasury website unless it is indicated that all or part of the submission should remain in confidence. Automatically generated confidentiality statements in emails do not suffice for this purpose. Respondents who would like part of their submission to remain in confidence should provide this information marked as such in a separate attachment.

Closing date for submissions is Friday 12 September 2014.