In an attempt to allay complaints that suppliers have been unfairly pressured into raising prices, the federal government of Australia announced on Monday that it may punish large supermarket chains billions of dollars if they violate an industry code of conduct.
The federal government said that grocery stores that generate more than A$5 billion ($3.3 billion) in revenue annually, such as Woolworths, Coles, Germany's ALDI, and wholesaler Metcash, will be required to abide by the code of conduct, which has up until now been optional. The federal government announced the change in response to a study by former minister Craig Emerson, which concluded that the existing code was "failing to address the imbalance of bargaining power between supermarkets and their suppliers, including farmers."
If the supermarkets violate the rule, which primarily addresses their interactions with suppliers, they might be fined up to 10% of their yearly revenue. Coles raked in A$37 billion, Woolworths A$48 billion, and Metcash A$10 billion in food sales in Australia in 2023. ALDI doesn't reveal its financial results.
A statement released jointly by Treasurer Jim Chalmers, Agriculture Minister Murray Watt, and Competition Minister Andrew Leigh stated, "This is about getting a fair go for families and a fair go for farmers."
In a separate statement, the federal government stated that enacting legislation to make the code mandatory will be given first priority. One of six government investigations of the nation's grocery industry, which analysts claim is among the most consolidated in the world, is the review. Two-thirds of all groceries sold in Australia are sold by Woolworths and Coles, the country's top two grocery retailers.
Woolworths and Coles representatives stated that their organizations were dedicated to promoting a sustainable grocery industry and would take into account the report's recommendations as well as the government's reaction.
According to a representative for ALDI Australia, the business was considering the final suggestions and agreed that the code of conduct should be made mandatory. Furthermore, as per Metcash representative, the firm is dedicated to upholding the code of conduct and will continue collaborating with suppliers to become their preferred partner. Additionally, National Farmers Federation has also reported that the modifications would facilitate grocery suppliers' ability to voice concerns when they think a major client is abusing its market position to drive down wholesale costs.
"With these modifications, the code should now have the authority it requires to safeguard farmers," stated Charlie Thomas, interim CEO of the federation. "To protect growers we need a code with strong enough deterrents to influence behavior in the supply chain." The Australian Competition and Commission's independent investigation of consumer pricing is scheduled to conclude in February 2025.
