Consumers might not feel the effects of a mandatory grocery conduct overhaul, as a peak consumer policy body says it will watch to ensure supermarkets don’t pass on any flow-on costs to Australians.
The federal government announced on Monday that it would impose new obligations on supermarket chains to treat their suppliers fairly, enforced by hefty fines. The soon-to-be-mandatory code will police unreasonable demands or threats by supermarkets on suppliers and will apply to companies with an annual revenue of $5 billion. This includes Woolworths, Coles, Aldi, and Metcash.
This initiative follows the main recommendation of a review conducted by former Labor minister Craig Emerson. The government will adopt all of Dr. Emerson’s recommendations, including fines of $10 million or three times the financial benefit of the breach, for supermarkets that don’t comply with the new code.
Dr. Emerson commented on the necessity of the overhaul, stating, “I had to look at whether the voluntary code was doing its job — it wasn’t, it had no penalties, and there were no disputes raised after 2021. So what it really means is that the supermarkets will need to treat their suppliers respectfully, and not use their superior bargaining power, the muscle that they have, particularly over smaller suppliers.”
While Dr. Emerson did not indicate that the recommendations would lead to fairer prices at the checkout, he mentioned that the new code would offer a “better deal” for suppliers, enabling them to compete even at lower prices.
Consumers’ Bottom Line Will Be ‘Watched Closely’
Erin Turner, CEO of the Consumer Policy Research Centre (CPRC), noted that while the overhaul of the code didn’t directly relate to consumer issues, it might have indirect effects. “If this works well, there’ll be different negotiating and bargaining powers, and we hope it will just see greater variety. Local options, smaller options on your supermarket shelves,” Ms. Turner said.
She emphasized that fairer prices for suppliers might not translate to savings for consumers. “I hope this means that large supermarkets take a fairer and likely lower cut, and it doesn’t hit consumers’ bottom line, but it’s something we’re going to have to watch closely,” she added.
Ms. Turner also advocated for the introduction of an “unfair trading prohibition,” which could act in place of laws that currently don’t exist in Australia to prevent businesses from treating customers unfairly. This would address issues like misleading supermarket pricing and confusing specials that don’t actually save customers money.
Ongoing Inquiries and Legislative Improvements
In February, a report by former ACCC chair Allan Fels, commissioned by the peak trade union body the ACTU, found supermarkets were exploiting their market power in ways that drove up inflation and hurt Australian households. The Australian Competition and Consumer Commission (ACCC) is also conducting its own inquiry into supermarket prices, with its interim report due to be handed to the government by the end of August.
Ms. Turner highlighted the need for consumer law to stand up to powerful corporate interests. Greens economic justice spokesperson Senator Nick McKim, who recently chaired a Senate inquiry examining the country’s supermarket prices, echoed this sentiment. He argued that food and grocery prices would not come down unless price gouging was made illegal and powers were created to “break up the supermarket duopoly.”
“The Code of Conduct does need to be made mandatory with significant penalties, which is exactly what the Greens-led Senate inquiry into price gouging recommended,” Senator McKim said. “However, it only regulates the relationship between supermarkets and suppliers, and won’t bring down the cost of food and groceries.”