Review urges mandatory code and fines for supermarkets

Supermarkets could face massive fines of up to $10 million for misbehaving under new recommendations made in a review of the Food and Grocery Code.

Apr 08, 2024, updated Apr 08, 2024

The Albanese government will on Monday release the interim report of Craig Emerson’s examination of the code, which is a voluntary scheme and governs how supermarkets interact with suppliers.

But the review does not back the forced break-up of supermarkets as a method of addressing market concentration, warning of less competition and job losses for workers.

Emerson, a former competition minister who led the government’s review, “firmly” recommends the “not effective” code be made mandatory and apply to supermarkets with yearly revenues exceeding $5 billion.

This would capture Coles, Woolworths and ALDI.

Under the changes, the Australian Competition and Consumer Commission would be brought into code enforcement and would be able to push for fines worth up to $10 million, 10 per cent of a supermarket’s annual turnover, or three times the benefit it gained from the breach.

“A heavy imbalance in market power between suppliers and supermarkets in Australia’s heavily concentrated supermarket industry necessitates an enforceable code of conduct,” Emerson said.

The code should also be strengthened to better protect suppliers, as their fear of retribution would compromise its effectiveness.

Treasurer Jim Chalmers said the government wanted a “fair go for families and a fair go for farmers”.

“This work is all about making our supermarkets as competitive as they can be so Australians get the best prices possible,” he said.

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As households struggle to pay for groceries due to high food prices, Woolworths and Coles are accused of price-gouging customers, stifling competitors and undermining suppliers.

Both the Greens and the coalition are working separately on divestiture powers.

The report says greater competition in the supermarket industry can be helped by an effective and mandatory code of conduct, enforcement of competition laws by the ACCC and policy reforms to planning and zoning.

It warns if forced divestiture resulted in a supermarket selling some of its stores to another large chain, the result could be even greater market concentration.

A lack of interest or inability to buy from smaller chains could cost workers their jobs as stores would be forced to close, it adds.

The report says this would also inconvenience local shoppers who would need to find somewhere else to buy their groceries.

Labor has been opposed to the forcible break-up of supermarket chains, with Prime Minister Anthony Albanese previously declaring the government wasn’t the Soviet Union.

Chalmers will deliver a speech in Sydney on Wednesday, where he will announce the government’s plans for reforms designed to boost competition in the economy.

Emerson’s final recommendations will be handed down by the end of June.


Topics: supermarkets
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