Supermarkets guilty of anti-competitive behavior towards their suppliers will face heavy penalties under a mandatory food and grocery code of conduct that the Albanian government will implement.

The government has accepted all the recommendations in the final report of an inquiry led by former Labor minister Craig Emerson.

The investigation followed complaints that large supermarkets were squeezing smaller suppliers, particularly those producing fruit and vegetables.

Emerson’s main recommendation was to make the current voluntary code mandatory, with heavy penalties for serious violations.

The maximum penalty provided for will be the greater of $10 million, or three times the profit derived from the offending conduct, or 10% of turnover for the preceding 12 months.

Emerson says in its final report, published by the government: “Making the Code mandatory is essential to ensure that it is effective in tackling the serious imbalance of market power between supermarkets and their suppliers, particularly their smaller suppliers. “.

He says the proposed penalties are the heaviest of all industrial codes.

There will also be better dispute resolution processes.

Emerson says that although constitutionally a mandatory code cannot impose binding arbitration, Woolworths, Coles, ALDI and Metcash have agreed in principle to be bound by arbitration.

Protections will also be strengthened against big supermarkets trying to retaliate against smaller players who complain about them, as well as protections for fresh produce suppliers.

The mandatory code would cover all food retailers and wholesalers with annual sales exceeding $5 billion. These would currently be Woolworths, Coles, ALDI and Metcash. Emerson says Costco is likely to exceed that threshold over time and thus fall foul of the code.

Amazon could also fall foul of the code if it begins offering a full line of groceries and fresh produce that exceeds the $5 billion threshold.

Emerson says it has considered the case for other businesses joining the code, including the sale of nursery plants by Bunnings, alcohol sales by affiliated supermarkets and sales of over-the-counter items by Chemist Warehouse.

But it decided the code should be limited to places where people regularly shop and to Metcash as the largest food wholesaler. “This is the purpose for which the code was developed.”

Emerson says the heaviest penalties “should apply to obligations imposed on supermarkets to deal with their suppliers lawfully and in good faith; have and maintain written grocery supply agreements; train staff; and keep records.

“Supermarkets that fail to comply with the new retaliation obligations would also be subject to these highest penalties.”

Emerson recommends that the Australian Competition and Consumer Commission establish an anonymous channel to receive complaints about retaliation and other breaches of the code.

The government said in a statement it was “crackling down on anti-competitive behavior in the supermarket sector so people get fairer prices at the checkout”.

The new measures will require changes to legislation and regulations.

The Australian Competition and Consumer Commission is conducting a separate investigation into supermarket pricing practices and the relationship between wholesale prices, including producer prices, and retail prices.

It will report to the government in February 2025 and deliver an interim report in August this year.

When Emerson’s interim report was released earlier this year, the National Farmers Federation’s Horticulture Council strongly supported key recommendations for a mandatory code and heavy penalties.

NFF Horticulture Council chairman Jolyon Burnett said at the time: “If we are to allow duopolies to exist, we must hold them accountable for any anti-competitive behavior.

“The next challenge will be to ensure that where the ACCC identifies an abuse of market power, there is a realistic chance of success in court within a commercial time frame. Otherwise, the announced fines will be in vain.”

“For decades, fruit, vegetable and plant nurseries were forced to bear the brunt of a tilted playing field, but could not speak out for fear of commercial retaliation. Having a report identifying these issues is an important step,” Burnett said.

The NFF Horticultural Council advocated for Bunnings to be included in the code, which was not the case.

Supermarkets guilty of anti-competitive behavior towards their suppliers will face heavy penalties under a mandatory food and grocery code of conduct that the Albanian government will implement.

The government has accepted all the recommendations in the final report of an inquiry led by former Labor minister Craig Emerson.

The investigation followed complaints that large supermarkets were squeezing smaller suppliers, particularly those producing fruit and vegetables.

Emerson’s main recommendation was to make the current voluntary code mandatory, with heavy penalties for serious violations.

The maximum penalty provided for will be the greater of $10 million, or three times the profit derived from the offending conduct, or 10% of turnover for the preceding 12 months.

Emerson says in its final report, published by the government: “Making the Code mandatory is essential to ensure that it is effective in tackling the serious imbalance of market power between supermarkets and their suppliers, particularly their smaller suppliers. “.

He says the proposed penalties are the heaviest of all industrial codes.

There will also be better dispute resolution processes.

Emerson says that although constitutionally a mandatory code cannot impose binding arbitration, Woolworths, Coles, ALDI and Metcash have agreed in principle to be bound by arbitration.

Protections will also be strengthened against big supermarkets trying to retaliate against smaller players who complain about them, as well as protections for fresh produce suppliers.

The mandatory code would cover all food retailers and wholesalers with annual sales exceeding $5 billion. These would currently be Woolworths, Coles, ALDI and Metcash. Emerson says Costco is likely to exceed that threshold over time and thus fall foul of the code.

Amazon could also fall foul of the code if it begins offering a full line of groceries and fresh produce that exceeds the $5 billion threshold.

Emerson says it has considered the case for other businesses joining the code, including the sale of nursery plants by Bunnings, alcohol sales by affiliated supermarkets and sales of over-the-counter items by Chemist Warehouse.

But it decided the code should be limited to places where people regularly shop and to Metcash as the largest food wholesaler. “This is the purpose for which the code was developed.”

Emerson says the heaviest penalties “should apply to obligations imposed on supermarkets to deal with their suppliers lawfully and in good faith; have and maintain written grocery supply agreements; train staff; and keep records.

“Supermarkets that fail to comply with the new retaliation obligations would also be subject to these highest penalties.”

Emerson recommends that the Australian Competition and Consumer Commission establish an anonymous channel to receive complaints about retaliation and other breaches of the code.

The government said in a statement it was “crackling down on anti-competitive behavior in the supermarket sector so people get fairer prices at the checkout”.

The new measures will require changes to legislation and regulations.

The Australian Competition and Consumer Commission is conducting a separate investigation into supermarket pricing practices and the relationship between wholesale prices, including producer prices, and retail prices.

It will report to the government in February 2025 and deliver an interim report in August this year.

When Emerson’s interim report was released earlier this year, the National Farmers’ Federation’s Horticulture Council strongly supported key recommendations for a mandatory code and heavy penalties.

NFF Horticulture Council chairman Jolyon Burnett said at the time: “If we are to allow duopolies to exist, we must hold them accountable for any anti-competitive behavior.

“The next challenge will be to ensure that where the ACCC identifies an abuse of market power, there is a realistic chance of success in court within a commercial time frame. Otherwise, the announced fines will be in vain.”

“For decades, fruit, vegetable and plant nurseries were forced to bear the brunt of a tilted playing field, but could not speak out for fear of commercial retaliation. Having a report identifying these issues is an important step,” Burnett said.

The NFF Horticultural Council advocated for Bunnings to be included in the code, which was not the case.