Supermarkets: Emerson recommends mandatory code with hefty fines

The federal government’s interim independent report into the food and grocery code has recommended sweeping changes including significant fines of as much as $10 million.

Coles, Woolworths, Aldi and Metcash could be bound by a new mandatory food and grocery code of conduct that includes fines for serious breaches of $10 million and beefed up protections against retribution.

In his interim report, former federal Labor minister Craig Emerson said the current code was ineffective and failed to rectify a heavy imbalance between the nation’s major retailers and its suppliers.

“An effective food and grocery code needed to be mandatory and subject to the credible threat of effective enforcement,” he said.

The federal government tasked the former minister for small business and competition policy and consumer affairs with the independent review of the voluntary code in January amid a cost-of-living crisis and mounting pressure on supermarkets for greater pricing transparency.

Dr Emerson has made 10 “firm recommendations” that will form part of his final report due in July, including a transition from a voluntary to a mandatory code capturing any retailer with revenue in excess of $5 billion and penalties for the worst breaches of the code scaling up to $10 million, to be enforced by the Australian Competition and Consumer Commission.

National Farmers’ Federation president David Jochinke said Dr Emerson’s push for a mandatory code was in line with the wishes of farmers who have long called for a firmer approach and tougher penalties for breaches.

“Clearly the Code has not been working as it was intended for many producers and a mandatory requirement provides more certainty and confidence to stakeholders across the supply chain,” he said.

Dr Emerson said suppliers’ fear of retribution, whether perceived or real, was so great that provisions had to be made to address this at a senior management level. This includes prohibiting incentive schemes for buying teams that had the adverse effect of squeezing suppliers to achieve the “optimal” margins.

Nationals leader David Littleproud has criticised the report for not going far enough.

“While recommendations including larger fines with enforcement and a mandatory Code were offered by The Nationals over a year ago, the broader suggestions won’t address all the issues consumers and farmers are facing,” Mr Littleproud said.

The former agriculture minister has been a vocal advocate for forced divestiture, something Dr Emerson’s report has said it does not support, which is in line with the NFF’s stance on the issue.

“This Review’s recommendations to make the Code mandatory, with heavy penalties for major breaches will, alongside effective enforcement of the existing competition laws, constitute a far more credible deterrent to anti-competitive behaviour than forced divestiture laws,” Dr Emerson said.