The commonwealth’s review into alleged price gouging by the major supermarkets will focus on whether suppliers are too scared of retribution to raise complaints – and whether the existing voluntary code of conduct needs to be strengthened or made mandatory.
The inquiry’s head, the former Labor minister Craig Emerson, has suggested a mandatory code with new enforcement measures – including taking stores to court – could resolve disputes more quickly.
“A mandatory code with penalty provisions would likely incentivise greater compliance by supermarkets,” he said. “Enforcement options could include infringement notices and court proceedings to impose financial penalties for non-compliance.”
The government on Monday will release a consultation paper for Emerson’s review of the food and grocery code of conduct.
The investigation was launched after concerns were raised about how big supermarkets treated suppliers, set prices and dealt with complaints.
Farmers and shoppers have been worried for some time that declining wholesale prices for fresh produce do not always lead to similar price drops on supermarket shelves.
Emerson was appointed in January – four months after the government announced the review – as Labor came under increasing pressure to address cost-of-living concerns.
The consultation paper invites submissions by 29 February on whether the code – which governs how Coles, Woolworths, Aldi and Metcash, which operates IGA, deal with suppliers and customers – should be amended. Options include making the voluntary code mandatory and reforming the complaints process.
“Substantially higher financial penalties would be needed” to effectively enforce breaches of the grocery code if the government decided to make financial penalties available, the paper states. It notes that penalties under existing industry codes are generally limited to $187,800 for each offence.
That’s not high enough to be an effective deterrent, considering the market power of the supermarkets, the paper argues.
The competition watchdog, the Australian Competition and Consumer Commission, does not have the power under the existing code to level financial penalties for non-compliance. The paper says the former ACCC chair Rod Sims “has described the absence of financial penalties for breaches of the code as a deep deficiency”.
Previous reviews of the grocery code found few suppliers raised disputes – with just five cases since an arbitration model was introduced in 2021. But the government’s consultation paper suggests that could hint at a deeper problem.
“Critics of the voluntary code argue that suppliers are too frightened to raise a dispute with a supermarket for fear of their product being removed from the supermarket’s shelves,” Emerson writes in a foreword to the paper.
He acknowledged any ACCC action could involve a lengthy process, a point raised by supporters of the voluntary code, but he suggested better mediation could help – including through settings like the Australian small business and family enterprise ombudsman.
The agriculture minister, Murray Watt, and the assistant minister for competition, Andrew Leigh, said the public should put forward their views during the consultation period.
Leigh encouraged suppliers and stakeholders to voice their concerns while Watt said producers should also get involved.
“Many farmers have talked to me about how hard they find it to deal with the supermarket chains and the lack of transparency that exists in those negotiations,” Watt said.