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Food and Grocery Code of Conduct Amendments – A new “Fair Go”

Food and Grocery Code of Conduct Amendments – A new “Fair Go”

The Food and Grocery Code of Conduct (the ‘Code’) serves as a voluntary guideline for grocery retailers and wholesalers in relation to their dealings with suppliers.

In 2015, the Australian Government prescribed the Code into law under the Competition and Consumer Act 2010. The purpose of the Code is to ensure that signatories do not abuse a superior bargaining power in their dealings with suppliers and establishes rules to regulate those commercial relations. Those rules include increasing commercial transparency, imposing minimum standards of business practice and providing equitable dispute resolution mechanisms.

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;
  • 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;
  • 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
  • promote and support good faith in commercial dealings.

The Code is voluntary because it regulates the conduct of those supermarket retailers and wholesales that have agreed to be bound by the Code in their dealings with suppliers.

In October 2018, the Government announced an independent review of the Code to assess the impact of the Code in improving the commercial relations between grocery retailers, wholesales and suppliers. The review recognised three main areas that needed improvement:

  • Retailers and wholesales with significant market power should become signatories.
  • The Code should be enhanced to ensure that suppliers receive both fairness in process and fairness in outcome during their commercial dealings.
  • The dispute resolution mechanisms in the Code have not been used to their full potential by suppliers due to fear of retribution for making complaints.

On 27 March 2019, the Government released its response to the independent review.

On 3 October 2020, various amendments were made to the Code. Here are the key points of change:

1. Improvements on good faith responsibilities in the Code to make it more user friendly and accessible to the industry. This makes it easier for suppliers to know what their rights and boundaries are relative to the groceries they supply.

2. Enhancements on procedures on dispute settlements so that suppliers have more assurance when raising their concerns. This gives suppliers more leverage and prevents them from being subject to abusive or unfair contracts and agreements.

3. Prohibition on inconsistent supply agreements with retroactive effects for retailers and wholesalers under any situation.

4. Limitations on conduct during negotiations on price between both parties to ensure an environment of cooperation and trust. This protects both parties from unreasonable prices and price increases.

These are just a few of the changes that have been made to the code of conduct. For more information visit the following sites:

Svethlana Milanes, ABComm

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Disclaimer. The material in this post represents general information only and should not be taken to be legal advice.

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