Supermarkets probe details call for mandatory supplier code amid ‘power imbalance’

What you need to know about 'price-gouging'

The federal government has published a consultation paper detailing a review into the food and grocery code of conduct, which will be headed up by former Labor minister Craig Emerson.

Why it matters: High prices at supermarkets have sparked public anger, pushing the federal government to unveil a series of reviews looking at why grocery prices have soared.

The grocery code review is one plank of the plan and will investigate how supermarkets like Coles and Woolworths deal with their suppliers, such as farmers and wholesalers of packaged foods.

The hope is that a reformed code will assist in delivering supermarket prices that are better in tune with what farmers are earning for the produce they’re selling into the big chain stores.

What we learned: The consultation paper canvasses what the review will cover and a statement from Dr Emerson, who says he will mull whether the voluntary code should be made mandatory.

  • The review will consider whether the existing voluntary code effectively improves relations between supermarkets and their suppliers
  • The degree of “power imbalance” between suppliers and the big supermarkets will be interrogated, including whether additional protections are needed for some products
  • Emerson said the “policy goals” of higher prices for suppliers and lower prices for consumers can be achieved through “greater competition between supermarkets”.

Key facts: The food and grocery code of conduct is voluntary, which means any non-compliance with its protections are not directly actionable by regulators such as the ACCC.

  • Currently very few suppliers make official complaints under the voluntary code and even fewer attempt arbitration; critics argue that’s because they’re scared of the big two
  • A mandatory code would increase penalties if the supermarkets wronged suppliers, including the potential for infringement notices, court proceedings and financial penalties
  • Emerson said Woolworths and Coles have a combined market share of 65 per cent, compared to the top two supermarkets in the UK having 43 per cent and the top four players in the US controlling just 34 per cent.

Zooming in: The review will produce an interim report for consultation ahead of a final report later this year, which will ultimately go to the government for a decision on the code’s future.

  • Former ACCC boss Rod Sims has said the current code is deeply deficient and that “supermarkets can walk away when they wish” because it’s voluntary
  • Supporters of the voluntary code argue that it’s cheaper to operate and that a mandatory code could create a more adversarial relationship between supermarkets and suppliers.

Zooming out: The grocery code is one of three measures the federal government is undertaking to take action on higher grocery prices, with competition and consumer transparency being addressed.

  • A separate review by the Australian Competition and Consumer Commission (ACCC) is examining whether supermarkets have engaged in price gouging and the state of competition across the industry
  • The government has handed $1.1 million in funding to consumer group Choice to prepare routine reports on how supermarkets are changing prices and which chain has the highest and lowest prices for a particular product
  • Prime Minister Anthony Albanese has said the government is willing to step in and ensure that consumers aren’t being ripped off at the grocery store and that lower farm gate prices should be passed onto shoppers.

Go deeper: Read the consultation paper here.

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