Australia is taking a bold step to ensure fair play in the supermarket industry. The federal government announced on Monday that it could impose billion-dollar fines on major supermarket chains that fail to comply with a newly enforced industry code of conduct.
The government’s move aims to address widespread concerns that suppliers, particularly farmers, are being unfairly squeezed on pricing.
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To who is this measure against supermarkets addressed?
This new regulation targets grocers with more than A$5 billion ($3.3 billion) in annual revenue. Currently, this includes major players like Woolworths, Coles, Germany’s ALDI, and wholesaler Metcash.
Until now, adherence to the code of conduct has been voluntary. However, following a report by former competition minister Craig Emerson, it became clear that the current code was “failing to address the imbalance of bargaining power between supermarkets and their suppliers”. In response, the federal government is making compliance mandatory.
Supermarkets that breach the code, which primarily governs their dealings with suppliers, could face fines of up to 10% of their annual turnover. This substantial penalty underscores the government’s commitment to protecting suppliers and ensuring a fair marketplace.
- Australia could impose billion-dollar fines on major supermarket chains for non-compliance with the industry code of conduct.
- Targeted grocers include Woolworths, Coles, ALDI, and Metcash.
- The code of conduct is now mandatory, addressing the power imbalance between supermarkets and suppliers.
- Fines could reach up to 10% of annual turnover for breaches of the code.
This decisive action by the Australian government is a significant step towards ensuring fairness and equity in the supermarket industry, ultimately benefiting suppliers and consumers alike.
In 2023, Woolworths reported Australian food sales reaching an impressive A$48 billion, while Coles generated A$37 billion and Metcash contributed A$10 billion. Notably, ALDI has chosen not to disclose its earnings.
Government’s Commitment to Fairness
In a joint statement, Treasurer Jim Chalmers, Agriculture Minister Murray Watt, and Competition Minister Andrew Leigh emphasized the importance of fairness for both families and farmers. “This is about getting a fair go for families and a fair go for farmers,” they said.
Mandatory Code of Conduct
The federal government has announced its intention to prioritize passing laws to make the code of conduct mandatory for the supermarket sector. This move aims to ensure a more equitable marketplace for all stakeholders involved.
Concentration in the Supermarket Industry
This review is just one of six government inquiries into Australia’s supermarket sector, which is often described as one of the most concentrated industries globally. Woolworths and Coles, the top two grocery retailers in the country, collectively account for a staggering two-thirds of all Australian grocery sales.
Industry Response
Representatives for Woolworths and Coles have expressed their willingness to consider the report’s recommendations and the government’s response. They remain committed to supporting a sustainable grocery sector that benefits all parties involved.
In a recent development, an ALDI Australia spokesperson affirmed the company’s support for making the code of conduct mandatory, noting that they are currently reviewing the final recommendations.
Meanwhile, a representative from Metcash was not immediately available for comment.
National Farmers Federation Backs Changes
The National Farmers Federation has voiced strong support for the proposed changes, emphasizing that these adjustments will empower grocery suppliers to speak up when they believe a large customer is misusing its market power to drive down wholesale prices.
“These changes should finally give the code the clout it needs to protect farmers,” said the federation’s acting CEO, Charlie Thomas. “To protect growers, we need a code with strong enough deterrents to influence behavior in the supply chain.”