Australia supermarkets should face hefty fines for code of conduct breach, says report (updated)

Metcash

08/04/2024 04:35

* 
      Report proposes mandatory code of conduct for supermarkets
    

        * 
      Cos should be fined up to A$10 mln or 10% of revenue for
conduct
breach, report recommends
    

        * 
      Rejects calls to give regulators power to break up big
chains
    

  
 (Writes through with reaction from Treasurer, Coles,
Woolworths, the ACCC)
    By Byron Kaye and Renju Jose
       SYDNEY, April 8 (Reuters) - Australia's major
supermarkets should face hefty fines if they do not comply with
an industry code of conduct when dealing with suppliers, a
government-commissioned report said while rejecting calls to
give regulators the power to break up the big chains.
    Supermarkets with more than A$5 billion ($3.3 billion) in
annual revenue - which at present are Woolworths  WOW.AX , Coles
 COL.AX , Germany's ALDI and wholesaler Metcash  MTS.AX  -
should be forced to comply with the code of conduct that has
until now been voluntary, the interim report by former
competition minister Craig Emerson recommends.
    "The existing Food and Grocery Code of Conduct 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. I firmly recommend the
Code be made mandatory," Emerson said in the report.
    Companies should be fined up to A$10 million or 10% of
revenue if they do not comply with the code, according to the
report. The final report is due in June. Woolworths and Coles
booked sales of A$64 billion and A$41 billion in 2023. 
    The two biggest grocers in Australia ring up two-thirds of
the country's grocery sales between them, prompting calls from
growers and opposition leaders to break up the supermarket
giants to improve competition and prices.
    Emerson's report, however, recommends against giving the
antitrust regulator power to make supermarket operators sell
assets, saying it could lead to higher market concentration.
    
    'MAKE CODE TOUGHER'
    Australia's centre-left Labor government, of which Emerson
is a former minister, is trying to show it can tame a cost of
living crisis that has fuelled criticism of supermarkets where
shelf prices have surged with a hike in fuel and labour costs.
    While there are six inquiries underway into the sector, the
government has ruled out demands to introduce divestiture powers
as demanded by the rural-focused Nationals, which are part of
the conservative opposition, and the left-leaning Greens.
    "The whole point of this interim report is how do we make
the code tougher and more compulsory, better dispute resolution
and processes and bigger penalties for people who do the wrong
thing," Treasurer Jim Chalmers told reporters.
    Divestiture powers were "not something we've been exploring
because we have found better, more effective ways to deal with
some of the issues in our competition policy landscape".
    Nationals leader David Littleproud, who has called for
break-up powers over the supermarkets, told reporters the
government had been too slow to "take action on supermarket
price-gouging".
    A spokesperson for the Australian Competition and Consumer
Commission, which would oversee a mandatory code of conduct and
which is conducting a separate review of the sector, said
Emerson's report highlights "several changes that the ACCC sees
as important, such as meaningful penalties and a more
independent dispute resolution process".
    A Woolworths spokesperson said the company supported making
the code of conduct mandatory but added that it should apply to
other large competitors like Amazon.com  AMZN.O  and Costco
 COST.O  which had bigger revenues globally.
    A Coles spokesperson said the company was committed to
"delivering value to our customers while maintaining strong,
collaborative relationships with our valued suppliers".
 ($1 = 1.5232 Australian dollars)

 (Reporting by Renju Jose and Byron Kaye in Sydney; Editing by
Lincoln Feast and Himani Sarkar)
 ((renju.jose@thomsonreuters.com;))