Timely Reminders on the Food and Grocery Code of Conduct

Codes of Conduct, Grocery Supply Agreements, Retailers, Suppliers, ACCC, potential penalties of $1 million – a lot has happened, or should have happened, since the transitional arrangements of the Food and Grocery Code of Conduct (the Code) ended on 1 July 2016.

It was by this date that the four signatories to the Code, Coles, Woolworths, Aldi and About Life, were required to be fully compliant with the Code.

Six months down the track, with indications that not all elements of the Code are being followed, it is timely to review the provisions of the code and what it means to the suppliers and to retailers.

Why the Code?

The Code was introduced to regulate the dealings between suppliers and retailers to ensure that these dealings were in good faith.

The Code’s Key Provisions

  • Prohibits Retailers requiring payments from suppliers for shrinkage
  • Requires Retailers to meet a set of minimum behavioural standards when dealing with matters such as delisting, allocation of shelf space and in relation to payments.
  • Restricts unilateral and retrospective variations to Grocery Supply Agreements
  • Provide a dispute resolution mechanism that includes contacting a Retailer’s nominated Code Compliance Manager, and possible escalation of complaints to the ACCC.

Suppliers should, by now, have a signed Grocery Supply Agreement with retailers that adhere to the provisions of the Code. However this Agreement is not the only protection afforded to Suppliers, as they do have the benefit of the protective provisions of the Code, whether or not they have a signed a new Agreement.

What all this means for Suppliers

  • Suppliers should carefully consider any requests for additional payments other than that set out in their Grocery Supply Agreement. At a minimum, if the matter for which that the retailer is requesting additional payment is already dealt with in the Grocery Supply Agreement, suppliers have a right to question the payment.
  • Any proposed delisting of products must only occur with reasonable notice, and be accompanied by reasons. Suppliers must be provided with a right of appeal in the event that they disagree with the delisting of their product. The ACCC noted in a speech recently that an audit had revealed that many delisting notices to date did not comply with these provisions.
  • Retailers are not entitled to make unilateral or retrospective changes to Grocery Supply Agreements. Requests for changes should be agreed between the parties and the Retailers must not threaten termination or business disruption to secure any changes to the Grocery Supply Agreement.

So what can Suppliers do?

If as a supplier, you are concerned that Retailers are acting contrary to the terms of the code, what steps might you take?

Firstly, you should contact the Retailer’s Code Compliance Manager, who should be clearly nominated by the Retailer.

If a Supplier still has concerns they should raise these concerns with the ACCC. After all, if the Retailer is found to be in breach of the Competition and Consumer Act 2010 by engaging in unconscionable conduct, the resultant penalty may be as much as $1.1 million – nothing to be sneezed at.

Liability limited by a scheme approved under Professional Standards Legislation.
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