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Coles, Woolies Could Be Fined Billions Under New Code Of Conduct

In a statement issued on Monday, Treasurer Jim Chalmers has agreed to a mandatory Food and Grocery Code of Conduct. The move could prove damning for supermarket giants who have been previously accused of unfair monopolistic practices and price gouging.

Chalmers said the government would adopt all 11 recommendations of a review into the code undertaken by former Labor cabinet minister Craig Emerson.

The code will be mandatory for all grocery retailers and wholesalers with an annual turnover greater than A$5 billion. At present, this would include Woolworths, Coles, Aldi and Metcash, and will perhaps subsequently include Costco once it crosses the A$5 billion threshold.

The code introduces penalties for the more harmful breaches with the maximum penalty the greatest of A$10 million, three times the benefit gained from the contravening conduct or 10 per cent of turnover in the preceding 12 months.

The latest code also strengthens formal and informal dispute resolution arrangements, creates an anonymous supplier and whistle-blower complaints mechanism within the Australian Competition and Consumer Commission (ACCC), places greater emphasis on addressing the fear of retribution and improves outcomes for suppliers of fresh produce.

The most severe penalties will apply to supermarkets that do not deal with suppliers lawfully and in good faith.

There will also be a second level of penalties of just over A$1 million and infringement notices worth just under $200,000 for less serious breaches.

A dispute-resolution process has already received an in-principle agreement from Woolworths, Coles, Aldi and Metcash which will be bound by compensation claims of up to A$5 million.

Also, small suppliers (with fewer than 100 staff or turnover below A$10 million) and larger suppliers with the system included in their supplier agreement would be able to make complaints to code arbiters who would then dispense judgments.

However, before a matter goes to arbitration, mediation will be obligatory. A supplier could agree to mediation by a code mediator, but if a supplier wants an independent mediator, that would also be available.

“We’re cracking down on anti-competitive behaviour in the supermarket sector so people get fairer prices at the checkout. This is about getting a fair go for families and a fair go for farmers. Our efforts will help to ensure our supermarkets are as competitive as they can be so Australians get the best prices possible,” said Chalmers.

In Australia, Coles and Woolworths control around 65 per cent of the supermarket sector. While the Albanese government has backed the code of conduct, it has stopped short of calling for a breakup of the supermarkets.

Prime Minister Anthony Albanese has previously dismissed calls to break up the supermarket saying in February, “we’re not the old Soviet Union”.

While Costco is moving towards the A$5 billion threshold under which the code of conduct becomes applicable, Emerson noted in his report that if Amazon began offering a full range of grocery products including fresh fruit and vegetables, it, too, could be subject to the code if its sales of groceries exceeded the A$5 billion threshold.

Similarly, he added, he has considered arguments for other retailers to come into the code, including the sale of nursery plants by Bunnings, the sale of wine, beer and spirits by supermarket affiliates, and of non-prescription items by Chemist Warehouse. But, he maintained, the code was drawn up to apply to supermarkets as conventionally understood as places for regular grocery shopping, and in the case of Metcash as the largest grocery wholesaler.

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