Introduction
The Competition and Consumer (Industry Codes—Food and Grocery) Regulations 2024 (Regulations) come into effect on 1 April 2025. The Regulations outline the new mandatory Food and Grocery Code of Conduct (Code). This replaces the current voluntary Food and Grocery Code enforced by the Australian Competition and Consumer Commission (ACCC).
The Food and Grocery Code was created as a voluntary code in 2015 to address harmful practices in the grocery industry stemming from an imbalance of bargaining power between supermarkets and their suppliers. However, significant stakeholder feedback to the Government indicated that the voluntary Code was not effective in achieving its purpose. A 2023-24 review of the voluntary Code was led by Dr Craig Emerson with the Government receiving a final report on 5 June 2024. Amongst the 11 recommendations made by Dr Emerson, all of which have been accepted by the Government, the first was to make the Code mandatory.
The aim of the mandatory Code is to protect suppliers and farmers, address imbalances in bargaining power between large grocery businesses (retailers or wholesalers) and their suppliers, protect suppliers from retribution, and strengthen dispute resolution mechanisms for suppliers.
Changes from the voluntary Code
Most of the requirements between the old voluntary and new mandatory codes have remained the same, except for some additional requirements under the mandatory Code. The Government has also modernised the mandatory Code by removing clothing, books, CDs, DVDs, video and audio tapes, and toys from the definition of ‘groceries’ given changes in the industry since 2015.
The additional requirements under the mandatory Code increase protection for suppliers through:
- prohibiting and protecting against retribution;
- requiring senior managers of large grocery businesses to oversee supplier interactions;
- requiring large grocery businesses to appoint a Code Mediator;
- requiring the appointment of a Code Supervisor which can independently review the processes of Code Mediators on request;
- requiring incentive schemes run by large grocery businesses to be consistent with the purposes of the Code;
- including a larger section on ADR processes available to suppliers
- requiring notification to the ACCC when a grocery business becomes a large grocery business within the relevant financial year; and
- confidentiality requirements for Code Mediators, Code Supervisors and parties to an ADR process.
The Regulations also include some saving provisions for any relevant regulations of the old voluntary Code that relate to record-keeping obligations, appointment of the Independent Reviewer and pending dispute resolution processes.
Requirements under the mandatory Code of Conduct
Under the mandatory Code, retailers must deal in good faith, have grocery supply agreements in writing and not vary these agreements without the consent of the supplier. The mandatory Code prohibits good faith being excluded from agreements between large grocery businesses and suppliers.
The Code states that retailers must not require any payments from the supplier to cover grocery wastage or shrinkage, as a condition for stocking groceries, for better shelf positioning, for the costs of activity taken in the ordinary course of business or to fund the costs of a promotion. However, the Code provides that if a supplier wishes to fund a promotion, this can be included in the grocery supply agreement. Retailers must provide all suppliers with the retailer’s product ranging principles and the retailer’s shelf space allocation principles.
With regards to fresh produce, the retailer must provide any fresh produce standards to a supplier in clear, unambiguous and concise written terms, and must only reject fresh produce with written reasons within 24 hours after it is delivered.
The retailer must also only delist a grocery product in accordance with the terms of the supply agreement and for genuine commercial reasons, cannot require suppliers to make any material changes to supply chain procedure and cannot prevent a supplier from forming an association of suppliers.
The Code states that retailers must respect the intellectual property rights held by the supplier in terms of branding, packaging and advertising. This include not infringing on intellectual property when developing own brand products and not requiring the supplier to license their intellectual property rights in relation to a grocery product as a condition or term of suppling an equal own brand product.
Who does the mandatory Code affect?
The Regulations are directed at larger retailers and wholesalers in the supermarket sector who have an annual total revenue of $5 billion. A retailer is a corporation that carries on a supermarket business in Australia while a wholesaler has been defined as a corporation that carries on a business of purchasing grocery products from suppliers for the purpose of resale to a person carrying on a supermarket business in Australia.
The Regulations consider a supplier to be a person carrying, or actively seeking to carry on, a business of supplying grocery products for retail sale to consumers by another person. The regulations state that a person who is a wholesaler may be a supplier. However, a large wholesaler may not be a supplier.
Penalties under the Code
The Government also passed the Treasury Laws Amendment (Fairer for Families and Farmers and Other Measures) Bill 2024 (Bill) at the end of 2024, which increases the penalties faced by large retailers or wholesalers for breaches of the mandatory Code. The Bill received royal assent on 10 December 2024 and the penalty increases commence on 1 April 2025, alongside the commencement of the Regulations.
The Mandatory Code will have a maximum penalty of the greatest of:
- $10 million;
- 3 times the value of the benefit that is attributable to the contravention; or
- if the court cannot determine the value of the benefit, 10% of turnover during the previous 12 months.
There will also be infringement notices given with increased penalties of up to 600 penalty units. The ACCC can issue infringement notices where it has reasonable grounds to believe that a supermarket has breached the Code. The Australian Government is also creating an anonymous supplier whistleblower complaints pathway through the ACCC.
HWL Ebsworth’s Intellectual Property team has extensive experience providing commercial advice to retailers, suppliers and consumers. If you have any questions or concerns about the upcoming mandatory Code and how it may affect you and your business, please do not hesitate to contact us.
This article was written by Luke Dale, Partner, and Bellarose Watts, Law Graduate.
