A heavy imbalance in market power between suppliers and supermarkets in Australia’s heavily concentrated supermarket industry necessitates an enforceable code of conduct. An effective code of conduct would benefit smaller suppliers and consumers by enabling suppliers to innovate and invest in modern equipment to provide better products at lower cost.

The existing Food and Grocery Code of Conduct (the Code) is not effective. It contains no penalties for breaches and supermarkets can opt out of important provisions by overriding them in their grocery supply agreements.

The Review’s central, firm recommendation is that the voluntary Code be made mandatory and subject to enforcement by the ACCC. The mandatory Code should apply to all large supermarkets that meet an annual revenue threshold of $5 billion (indexed for inflation). Revenue would be in respect of carrying on business as a grocery ‘retailer’ or ‘wholesaler’ (as defined in the voluntary Code). At this stage this would capture Coles, Woolworths, ALDI and Metcash. All suppliers to these businesses would be covered by the Code.

This interim report proposes a solution involving the best of both worlds: replicating the processes for independent mediation and arbitration in other Codes while taking the best features of the voluntary Code, improving them, and importing them into the mandatory Code. These features include avenues for suppliers to raise issues informally and confidentially, options for mediation and arbitration, and stronger protections for suppliers.