Supermarkets, grocery suppliers still at odds over code

Blair Speedy
July 10, 2013
The Australian

SUPERMARKET giants Coles and Woolworths are still months away from reaching an agreement with grocery suppliers over a code of conduct designed to prevent them from abusing their market power.

The apparent slowdown in negotiations came as agribusiness leader Donald McGauchie urged the Australian Competition & Consumer Commission to speed up its investigation of claims that supermarkets were strong-arming suppliers.

Next month — almost a year since negotiations over the voluntary code began — the retailers will hold a new round of negotiations with the Australian Food and Grocery Council, which represents suppliers.

It is understood the two sides are still unable to reach agreement over the vexed issue of private-label groceries — the in-house supermarket brands that are increasingly replacing the branded products that offer higher margins to suppliers.

The AFGC has been pushing for retailers to have separate buying teams for private-label products, alleging that without them the supermarkets can copy any new products they introduce with their own knock-off version.

For their part, the supermarkets say that maintaining separate buying teams would be too costly, and in any case the manufacturers have no ideas worth stealing.
However, sources close to the negotiations say there is an increasing recognition from manufacturers that ring-fencing the supply of private label products is “a difficult ask”.

Negotiations have been further complicated by Joe Ludwig’s resignation as agriculture minister following Kevin Rudd’s re-appointment as Prime Minister last month, to be replaced by Joel Fitzgibbon, while newly appointed Industry Minister Kim Carr has been vocal in expressing concern over retailers’ behaviour towards suppliers.

“Nobody wants to put their cards on the table until there’s a clear picture of how the political landscape might have changed,” said one source involved in the process.
However, the Minister for Competition Policy and Consumer Affairs, David Bradbury, has retained his position following the leadership spill.

Meanwhile, Mr McGauchie, chairman of AACo and Nufarm, as well as a director of GrainCorp, has urged the ACCC to get to the bottom of bullying claims being made by suppliers against the supermarkets.

“There are some accusations made against the supermarkets that I have heard from a number of sources that need investigation and the ACCC needs to do that,” said Mr McGauchie.
“They need to have sensitive ways of doing that because people tell me they are concerned about the way supermarkets treat them and are concerned that if they are seen to be making comments about that publicly, it would endanger their business.”

Mr McGauchie is also a former president of the National Farmers Federation, which pulled out of negotiations over the code in March, saying it preferred a mandatory code.
Such a code has also been backed by ACCC chairman Rod Sims, and threatened by the federal government in the event that the voluntary code is ineffective. But it would require its own enacting legislation and could result in harsher penalties for breaches.

A voluntary code would be overseen by the ACCC, which would also be required to draft the final version, mating each provision with specific parts of the Competition Act.