Emerson report: Supermarket code to be mandatory, new beefed-up fines

The federal government’s review into the supermarket code of conduct has made nine recommendations, but it still falls short for some farmers.

Retailers will be forced to abide by a supermarket code of conduct that includes beefed up penalties of up to $10 million for breaches.

On Monday the federal government published economist and former Labor MP Craig Emerson’s final report from his review into the supermarket code of conduct, and committed to implementing all 11 of his recommendations.

“This is all about ensuring a fair go for farmers,” Treasurer Jim Chalmers said.

“This is part of a broad suite of changes that we are implementing to make our supermarkets and our economy broadly more competitive, making the Food and Grocery Code mandatory, strengthening and streamlining the mergers regime, empowering the ACCC and also funding CHOICE to ensure that there is more price transparency.”

In addition to making the food and grocery code of conduct mandatory, Dr Emerson’s independent review recommended addressing suppliers’ fear of retribution by requiring incentive schemes operated by retailers’ buying teams to be consistent with the purpose of the code.

Craig Emerson. Picture: Bianca De Marchi

He also recommended an anonymous complaints mechanism be established so complaints could be raised directly with the Australian Competition and Consumer Commission, and that any exceptions allowed for in grocery supply agreements had to be “reasonable and transparent”, with the retailer bearing the onus of proof.

Once legislated, breaches of the code will rise from $1 million to $10 million. “These penalties would ensure supermarkets took compliance with their obligations under the Code seriously,” Dr Emerson said.

The NFF has welcomed Emerson’s final report, and the federal government’s response to act on all 11 recommendations.

“This is a significant step in our campaign to level the playing field for farmers,” Mr Thomas explained,” NFF acting chief executive Charlie Thomas said.

“We’ve always said that to protect growers, we need a code with strong enough deterrents to influence behaviour in the supply chain.”

Mr Thomas said it was hoped a mandatory code would give farmers, and those in the horticulture sector in particular, the confidence to raise issues without fear of retribution, a theme repeatedly raised in the inquiry’s hearings.

The code will be mandatory for all retailers with annual Australian revenue of more than $5 billion, which currently applies to Woolworths, Coles, ALDI and Metcash.

The NFF Horticulture Council said some of the measures it was hoping for to protect fresh produce suppliers have been left out of Dr Emerson’s final report, including making supermarkets report publicly to suppliers on the accuracy of their volume forecasting, and removing rebates entirely.

The retailers have been accused of deliberately “over-ordering” in order to create an oversupply, bringing down prices paid to growers.

The federal government has promised to prioritise updating the legislation to correct the power imbalance between Australia’s two major retailers and their suppliers.

Dr Emerson’s review has been conducted at the same time as the ACCC’s inquiry into supermarket prices.