Competition and Consumer Act 2010—Competition and Consumer (Industry Codes—Food and Grocery) Regulation 2015
An inquiry into the Competition and Consumer Act 2010—Competition and Consumer (Industry Codes—Food and Grocery) Regulation 2015
The short review was established on 5 March 2015 and arose from concerns about the likely effectiveness of the Code. The Committee reported on 14 May 2015.
The Code of Conduct
The Explanatory Statement attached to the Regulation states:
The Competition and Consumer (Industry Codes - Food and Grocery) Regulation 2015 (Regulation) provides for the Food and Grocery Code1 (the Code), a voluntary industry code for the food and grocery sector made under the Act.
The purpose of the Code is to improve standards of business conduct in the food and grocery sector. It is in response to concerns raised in the public debate in recent years about the conduct of retailers (in particular, supermarkets) towards their suppliers, and has arisen out of an industry led response to these issues. In this sense, the Code aims to regulate commercial relations between retailers and wholesalers, on the one hand, and suppliers, on the other hand, to the extent that they are not regulated by other codes. The purpose of the Code is:
- to help to regulate standards of business conduct in the grocery supply chain and to build and sustain trust and cooperation throughout that chain;
- to ensure transparency and certainty in commercial transactions in the grocery supply chain and to minimise disputes arising from a lack of certainty in respect of the commercial terms agreed between parties;
- to provide an effective, fair and equitable dispute resolution process for raising and investigating complaints and resolving disputes arising between retailers or wholesalers and suppliers; and
- to promote and support good faith in commercial dealings between retailers, wholesalers and suppliers.
In order to achieve its ends, the Code includes provisions setting out certain standards of conduct that cover the life cycle of the relationship between retailers or wholesalers and suppliers. It seeks to address the potential imbalance between retailers and suppliers with respect to the allocation of risks. It also recognises suppliers’ need for certainty to plan appropriately for their business, invest, innovate, and expand capacity or develop new product lines. Some of the requirements have limited exceptions, and place the onus on the retailer or wholesaler of proving that an exception applies in the circumstances.
The Code includes several protections for suppliers. For example, it requires that grocery supply agreements must be in writing and include certain matters. The Code also prohibits retailers or wholesalers from engaging in certain conduct (for example, they cannot unilaterally or retrospectively vary a grocery supply agreement) unless certain exceptions apply. In most cases, these exceptions will need to be provided for in the grocery supply agreement and are subject to a reasonableness test. The retailer or wholesaler will bear the onus of proving that the exception applies in circumstances where the supplier claims that the prohibited conduct has been engaged in.
The Code aims to improve transparency and clarity in commercial transactions within the supply chain by, in effect, encouraging the parties to include upfront provisions in their grocery supply agreements about a number of aspects of their relationship. This should help increase certainty.
Importantly, the Code also requires retailers and wholesalers to deal lawfully and in good faith with suppliers, thus aiming to improve trust between the parties.
The Code also provides a number of dispute resolution avenues for a supplier to raise its concerns about a retailer or wholesaler, including internal and external mechanisms (such as mediation or arbitration). This should assist the parties to resolve their differences in a fair and equitable manner.
There was limited opportunity for submission to the inquiry; the inquiry opened on 5 March 2015 and submissions were due on 13 March. Five submissions were received: