Large Australian supermarkets could face fines of up to $10 million (US$6.57 million) for misconduct under a proposal to impose a mandatory code of conduct on the sector.
It comes as supermarkets bear the brunt of criticism for alleged price gouging amid the country’s cost of living crisis.
Former Labor Minister Craig Emerson, who led the review, stated that the current code was ineffective in managing the behaviour of supermarkets.
“It contains no penalties for breaches, and supermarkets can opt out of important provisions by overriding them in their grocery supply agreements,” he said in the report.
Mr. Emerson then recommended the government impose a mandatory code on all supermarkets with annual turnovers of above $5 billion, effectively covering major companies such as Woolworths, Aldi, Coles, and wholesaler Metcash.
Under the mandatory code, the Australian Competition and Consumer Commission (ACCC) would have the power to enforce penalties on entities that breach the code.
The interim report proposed lifting the maximum penalty to $10 million, three times the value of the benefit from the breach, or 10 percent of the annual turnover of the company for serious breaches and 600 penalty units (around $187,800) for lesser violations.
‘Code Mediators’ to Resolve Disputes Between Supermarkets and Suppliers
The proposed mandatory code will also grant new tools for the ACCC to enforce the rules while introducing a new mechanism–Code Mediators–to help resolve disputes between supermarkets and suppliers.At the same time, the report said the mandatory code would enhance protection against retribution from supermarkets on suppliers who have complained about their business practices.
After the report was released, Prime Minister Anthony Albanese said the government wanted “a fair go for families and a fair go for farmers.”
“What is happening at the moment is that the power of the supermarkets with just a voluntary code of conduct has seen a lack of confidence in the system.”
A Coles spokesperson said the supermarket giant would remain committed to the objectives of the code of conduct in delivering value to customers while maintaining strong relationships with suppliers.
Woolworths Says Code Should Apply to All Majors
Meanwhile, a Woolworths spokesperson said the company supported the code becoming mandatory.In addition, the supermarket chain believed the code should apply to all large retailers and wholesalers of groceries, to improve public trust and build a level playing field for retailers and wholesalers.
“The Code should apply to all major retailers operating in Australia, including global retail giants such as Amazon and Costco, who have global revenues many times the size of Australian supermarkets, as well as to large Australia retailers such as Bunnings and Chemist Warehouse who also compete in grocery categories including everyday needs such as household products, and personal care,” the spokesperson said.
“We will consider the interim report in detail, and we remain committed to continuing to engage constructively with Dr. Emerson and the review.”
Objection to Breaking Up Large Supermarkets
While supporting stricter rules, the report recommended against breaking up supermarket chains via “forced divestiture”—forcing them to divest themselves of assets (stores and brands)—warning it could exacerbate the problem.Mr. Emerson stated that the measure would result in less competition and job losses as it would be unlikely for the government to find buyers for the divested supermarkets.
“(Divestiture) is one of these, frankly, populist ideas ... who do you sell the stores to?” he questioned.
“Let’s say it’s Coles who gets hit by forced divestiture, they’re going to sell to Woolworths? What does that do for market concentration?”
The former minister also believed that a mandatory code was a better way to protect the interests of suppliers.
“What I’m proposing is credible, and it has been checked with the (consumer watchdog) that the supermarkets would be very mindful of the legislation if the government picks this up,” he said.
“The divestiture stuff is never going to happen.”
Mr. Emerson’s statement comes as the Australian Greens and Coalition work on separate legislation to introduce divestiture into Australian competition law.
Opposition Says Inflation Not Supermarket’s Fault
While Opposition Leader Peter Dutton criticised Coles and Woolworths for their alleged non-competitive behaviours, he pointed out that the current cost of living crisis was the result of the Labor government’s policies.Mr. Dutton also noted that the government’s high spending in the past few years contributed to the current high inflation rate.
“Core inflation rate in this country is higher than most other comparable nations,” he said.
“The Reserve Bank government has pointed out that our problem here is homegrown, and the government continues to spend … The Reserve Bank has a very tough time arriving at a decision to reduce the interest rates.”
