Supermarkets on notice over grocery code of conduct

Sue Mitchell
May 18, 2015
The Age
Coles and Woolworths may have to answer to a grocery industry ombudsman in three years if they fail to embrace the principles of a voluntary code of conduct expected to be approved by Parliament next month.
The major grocery chains have come under renewed pressure to sign the grocery industry code of conduct after a Senate committee recommended last week that the regulation stand without further amendment, despite widespread calls from suppliers for a mandatory rather than a voluntary code and for the appointment of an ombudsman.
In a dissenting report, four Nationals senators – Matthew Canavan, Bridget McKenzie, John Williams and Barry O’Sullivan – called for the government to appoint an ombudsman to ensure compliance with the code and to settle disputes between retailers and suppliers, citing the cost of mediation and arbitration, and the hurdles for small suppliers attempting to make complaints against major retailers.
“Given the disparity between suppliers on the one hand and the major supermarkets on the other – in terms of market power, financial resources as well as experience and expertise in dealing with disputes – the ability of the code to operate effectively hinges on the presence of effective, accessible and timely dispute resolution mechanisms,” the senators said.
Levy suggested
The group has suggested that the Small Business and Family Enterprise Ombudsman established earlier this year act as grocery ombudsman and that the cost of dispute resolution be funded by a small levy paid by signatories to the code.
However, the retailers are vehemently opposed to an ombudsman, saying it would create red tape and cramp their relationships with suppliers.
The Senate economics legislation committee report acknowledged concerns about the voluntary nature of the code and the cost of dispute resolution, but noted the code would come up for review in three years.
“This review must consider … whether the purposes of the code are being met, levels of compliance with the code, whether it should be mandatory or voluntary and whether it should include civil penalties,” the report said. “As such, the committee believes that the concerns raised during this inquiry would be best considered as part of the review.”
Senator Canavan said the dissenting group would continue to press its case for an ombudsman with the Minister for Small Business Bruce Billson. ​However, sources said both the government and the opposition appeared keen to pass the regulation as is and there were no disallowance motions.
Commitment questioned
Senator Canavan questioned Coles’ and Woolworths’ commitment to the code, saying neither had agreed to appear at the inquiry and appeared unwilling to sign the code if an ombudsman was appointed.
“If they’re not willing to sign up with an ombudsman, you have to question their commitment to it,” Senator Canavan told The Australian Financial Review.
Aldi has agreed to sign the code and Metcash has said it will adopt its provisions on a trial basis over the next 12 months, but Coles and Woolworths say they are waiting to see if the regulation is ratified before signing up.
“Woolworths has been a strong supporter of a voluntary industry code of conduct and we look forward to seeing the government’s proposal after it has been considered by the Senate,” a Woolworths spokesman said.
“Coles will assess the final form of the code once it has been ratified by the Parliament,” a Coles spokesman said.
The code of conduct prohibits certain types of unfair conduct by retailers and wholesalers in their dealings with suppliers and provides a clearer framework for retailer and supplier negotiations.