Australian supermarket faces hefty fines for breaching code of conduct, Reuters reports

Byron Kaye and Renju Jose

SYDNEY (Reuters) – Australia’s major supermarkets will face hefty fines if they do not adhere to industry codes of conduct when dealing with suppliers, a government-commissioned report said, giving regulators the power to break up large chains. The request to grant was rejected.

Supermarkets with annual revenues of more than A$5 billion ($3.3 billion) – now including Woolworths, Coles, Germany’s ALDI and wholesaler Metcash – must adhere to the code of conduct, which has until now been voluntary. Recommended by former Competition Secretary Craig Emerson (NYSE:).

“The existing Food and Grocery Code of Conduct is not effective. It does not contain penalties for breaches and supermarkets can opt out of grocery supply contracts by ignoring important provisions. I strongly recommend that this code be made mandatory.” said Emerson. report.

According to the report, companies could face fines of up to A$10 million, or 10% of their turnover, if they fail to comply with the regulations. The final report is scheduled to be submitted in June. Woolworths and Coles recorded sales of A$64 billion and A$41 billion in 2023.

Australia’s two biggest grocers account for two-thirds of the country’s grocery sales, sparking calls from growers and opposition leaders to break up the supermarket giants to improve competition and prices.

But Emerson’s report opposed giving antitrust regulators the power to force supermarket operators to sell their assets, saying it could increase market concentration.

‘Make your code stronger’

Australia’s centre-left Labor government, of which Emerson is a former minister, is trying to show it can ease a cost-of-living crisis that has sparked criticism of supermarkets whose shelf prices have soared due to rising fuel and labor costs.

While six investigations into the sector are ongoing, the government has ruled out calls for the introduction of corporate spin-off rights by the conservative opposition, the rural-oriented People’s Party and the left-wing Green Party.

Treasurer Jim Chalmers told reporters: “The point of this interim report is how we can make regulations stronger and more mandatory, create better dispute resolution and procedures and create greater penalties for people who do the wrong thing. “Is it okay?” he said.

Divestiture powers “are not something we have been exploring because we have found better and more effective ways of dealing with some of the issues in the competition policy environment”.

Nationals leader David Littleproud, who has called for separate powers for supermarkets, told reporters the government was too slow “to take action against supermarket price gouging”.

A spokesperson for the Australian Competition and Consumer Commission, which oversees mandatory codes of conduct and is carrying out a separate review of the sector, said Emerson’s report “makes several changes that the ACCC considers important, such as meaningful penalties and more penalties.” “We are emphasizing,” he said. See ‘Independent Dispute Resolution Procedures’.

A Woolworths spokesperson said the company supported mandating a code of conduct, but added it should also apply to other large competitors such as Amazon.com (NASDAQ:) and Costco (NASDAQ:), which have bigger revenues globally.

A Coles spokeswoman said the company was committed to “delivering value to our customers while maintaining strong, collaborative relationships with our valued suppliers”.

($1 = 1.5232 Australian Dollars)