The Federal Government will adopt every recommendation “in full” from aof supermarkets, including a mandatory code of conduct.
Findings handed down in April detailed several measures to ensure fair business practices between supermarkets and suppliers, such as farmers.
The mandatorycould see supermarkets fined billions of dollars for breaches.
Here’s the latest.
Supermarket review
Coles and Woolworths control roughly two-thirds of Australia’s supermarket sector. Each company reported profits of more than $1 billion last financial year.
The Government ordered an independent review in January amid growing concern about supermarkets setting unfair prices for customers.
The review, led by former Labor MP Craig Emerson, focused largely on changes that could be made to the Food and Grocery Code of Conduct — a voluntary set of industry regulations, developed by the supermarkets in 2015.
Supermarket Code of Conduct
Coles, Woolworths, Aldi and IGA suppliers Metcash are all signed to the Code.
Emerson’s findings were first shared in an interim report published in April.
In this report, he recommended that the Code be made mandatory, enforced by the Australian Competition and Consumer Commission (ACCC).
Emerson proposed fines for major breaches calculated at 10% of total annual sales. Under this modelling, penalties for Coles and Woolworths could surpass $4 billion.
Government comments
On Monday, the Government announced it had accepted all of the recommendations in the final report, also released on Monday.
This includes an anonymous reporting tool to field complaints about anti-competitive behaviour by supermarkets from suppliers and whistle-blowers. The Code will also become mandatory for Australia’s major supermarkets.
Legislation will be required to implement some of Emerson’s recommendations, which the Government will now begin to draft.
Penalties
The reforms mean supermarkets will face one of three fines for major breaches of the revamped mandatory Code.
This will be whichever is the largest amount of either:
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$10 million
Three times the value of any benefit gained from a breach
10% of sales in the year before the breach.
Major breaches could include a failure by supermarkets to fairly deal with suppliers, or for systemic record-keeping breaches.
Competition
Emerson noted that a lack of competition in the supermarket sector has driven concern about retailers’ business practices.
He said tougher fines and enforcement would enhance competition in the supermarket sector.
Emerson didn’t support measures that would force supermarket giants to sell off parts of their business, saying this wouldn’t guarantee greater market competition.
Other measures
The ACCC is leading a separate year-long inquiry into supermarket prices and their business practices with suppliers.
An interim report is due to the Government by the end of August, ahead of a final report in February.
Consumer group CHOICE will also share quarterly research on supermarket prices for the next three years.
Its first report, out last week, found Aldi was significantly cheaper than Coles and Woolworths. Groceries were most expensive in jurisdictions where there are no Aldi stores — Tas and the NT.
Supermarket responses
Woolworths said it supported a mandatory Code and strong relationships with suppliers.
The supermarket giant said it would continue to consider the recommendations of the Emerson review.
Coles also said it would consider the review and the Government‘s response “in detail“, adding that it would “remain committed to supporting a healthy and sustainable grocery sector“.
Aldi also supported the Code becoming mandatory. They’re also reviewing the proposals in the final report.
Metcash said they “remain committed” to the Code of Conduct, and would “continue to focus on working constructively with our suppliers”.
