Australia's biggest supermarkets have agreed to a code of conduct governing how they deal with suppliers, providing a potential solution to long running tension between food and grocery producers and retail giants.
Under the voluntary code of conduct, Coles and Woolworths have undertaken not to change the terms of supply contracts retrospectively, charge suppliers for goods broken and stolen at stores, or seek payments from suppliers to secure better shelf positioning.
The code also requires supermarkets not to infringe on a supplier's intellectual property in areas such as brand names and packaging, when developing their own brand products.
The code was negotiated between the supermarkets and the Australian Food and Grocery Council (AFGC), which represents packaged food, drink and grocery producers.
AFGC chief executive Gary Dawson said the agreement was intended to "even up the imbalance" in market power in negotiations between supermarkets and suppliers.
While the code did not solve every problem in the food supply chain, it was a positive development, Mr Dawson said.
"We are certainly not pretending this is the answer to every issue but it is nonetheless a significant step forward to have agreement from both retailers and suppliers on a set of rules of engagement," he said.
The voluntary code agreement came after more than a year of negotiations, during which time the National Farmers Federation withdrew because the farmer's body wanted a mandatory code.
It also comes as the Australian Competition and Consumer Commission (ACCC) continues an investigation into alleged abuses of market power by supermarkets in dealings with suppliers.
Mr Dawson said the code would not stop the investigation.
"The ACCC is investigating quite serious allegations around abuse of market power and unconscionable conduct," he said.
"Nothing in the code or the development of the code will have any influence on that investigation."
Mr Dawson also said the new code should not result in higher prices at supermarkets.
"There is nothing in the code about prices," he said.
"The test will be, does it even up the imbalance of market power in some of those negotiations between suppliers and retailers?
"It is still entirely up to individual companies to negotiate the best deal possible."
Federal Small Business Minister Bruce Billson congratulated the AFGC, Coles and Woolworths for moving to protect small suppliers in the highly competitive supermarket sector.
"Where that competition is fierce and there is an imbalance in market power there is a greater duty and responsibility on those big businesses to wield that power with care so they're not causing harm and damage elsewhere," he told ABC Radio.
The code, which is a draft, will be assessed by the federal government and ACCC before going to a vote in parliament to become enforceable under the Competition and Consumer Act.
Share
