Australia to make supermarket industry code mandatory, breaches may result in huge fines (updated)

Metcash

24/06/2024 05:19

(Adds Metcash comment in 10th paragraph)
    By Byron Kaye
       SYDNEY, June 24 (Reuters) - Australia could impose
billion dollar fines on big supermarket chains that fail to
comply with an industry code of conduct, the federal government
said on Monday as it seeks to address concerns that suppliers
have been unfairly squeezed on pricing.
        Grocers with more than A$5 billion ($3.3 billion) in
annual revenue - currently Woolworths  WOW.AX , Coles  COL.AX ,
Germany's ALDI and wholesaler Metcash  MTS.AX  - will be made to
comply with the code of conduct that has until now been
voluntary, the federal government said.
    The move comes after a report by former competition minister
Craig Emerson found the current code was "failing to address the
imbalance of bargaining power between supermarkets and their
suppliers, including farmers", the federal government said.
    The supermarkets will face fines of up to 10% of annual
turnover for breaches of the code which mainly covers dealings
with suppliers. Woolworths reported Australian food sales of
A$48 billion in 2023, Coles took A$37 billion and Metcash had
A$10 billion. ALDI does not disclose its earnings.
    "This is about getting a fair go for families and a fair go
for farmers," a joint statement by Treasurer Jim Chalmers,
agriculture minister Murray Watt and competition minister Andrew
Leigh said.
    The federal government will prioritise passing laws to make
the code mandatory, it said in a separate statement.
    The review is one of six government inquiries into the
country's supermarket sector which commentators say is one of
the most concentrated industries in the world. Woolworths and
Coles, the No. 1 and No. 2 grocers, together sell two-thirds of
all Australian groceries.
    Representatives for Woolworths and Coles said their
companies would consider the report's recommendations and the
government's response and were committed to supporting a
sustainable grocery sector.
    An ALDI Australia spokesperson said the company supported
making the code of conduct mandatory and was reviewing the final
recommendations.
    A Metcash spokesperson said the company was committed to the
code of conduct and would keep working with suppliers to be
their partner of choice.
        The National Farmers Federation said the changes would
make it easier for grocery suppliers to speak up when they
believed a large customer was misusing its market power to drive
wholesale prices lower.
    "These changes should finally give the code the clout it
needs to protect farmers," the federation's acting CEO, Charlie
Thomas, said.
    "To protect growers we need a code with strong enough
deterrents to influence behavior in the supply chain."
    A separate inquiry into consumer pricing by the Australian
Competition and Commission is due to report in February 2025.
    
    ($1 = 1.5074 Australian dollars)

 (Reporting by Byron Kaye; Editing by Edwina Gibbs)
 ((byron.kaye@thomsonreuters.com; +612 9171 7541; @byronkaye;))