Farmers slam supermarket code of conduct ‘loopholes’
An updated Food and Grocery Code of Conduct draft has been criticised for not g
In September, the government released an exposure draft of the Competition and Consumer (Industry Codes – Food and Grocery) Regulations 2024, which included major amendments to the Food and Grocery Code of Conduct in line with recommendations from an independent review earlier this year.
National Farmers Federation (NFF) Horticulture Council chair Jolyon Burnett welcomed some of the draft’s changes, such as making the code mandatory for large grocery businesses, noting the exclusion of Bunnings was disappointing.
But he also said ambiguous language meant the code was riddled with loopholes.
As a result, the NFF Horticulture Council confirmed this week it would not support an updated Food and Grocery Code of Conduct in its current draft form.
Wording concerns
The draft code requires supermarkets to take “due care” when telling suppliers how much produce they expect to buy, and to communicate changes to produce standards and specifications within a “reasonable” amount of time.
Burnett said a first-year law graduate could work around those terms, let alone the high-powered legal teams major supermarkets like Coles and Woolworths could employ.
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“It gives us no confidence that the retailers will be held to account,” he said.
“[The draft’s loopholes] ultimately mean, in our view, that the behaviour of the supermarkets in their dealings with small fresh produce suppliers won’t really change at all.”
Possible outcomes
He said some of the dodgy behaviour that grocery retailers could continue to get away with include:
- Telling growers the retailer will buy a certain amount of fresh produce, then buying less. This leaves growers to try and sell their excess produce elsewhere at discounted prices, which retailers could then use as an excuse to lower prices in stores
- Retailers giving themselves discounts on fresh produce in exchange for quick payment to growers, marketing the produce in the retailer’s promotional magazines, or for premium shelf positioning
- Being inconsistent with fresh produce standards, resulting in rejected produce or forced discounts.
“Those sorts of behaviours are what led to many growers saying they haven’t received a price increase in over 10 years, and at the same time their costs have all gone up, just as the supermarkets’ costs have gone up,” Burnett said.
“Those sort of terms [in the draft code], they really just give a continuing green light to supermarket behaviour because they’re not clear enough. They’re not prescriptive enough to really change the behaviour.
“There is a significant imbalance in power; fresh produce growers are particularly vulnerable because they grow a highly perishable product, so if you want to sell your product you’ve really got to take whatever terms [the supermarkets] dictate.”
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An AusVeg report released in September found 34 per cent of growers were considering leaving the industry in the next 12 months due mainly to increased costs, lack of profit and poor retail prices.
More changes needed
The updated Food and Grocery Code of Conduct is set to be enforced on April 1, 2025.
But the NFF Horticulture Council is calling on the government to pause implementation until the Australian Competition and Consumer Commission completes its supermarkets inquiry and hands down recommendations.
“More importantly, we would like the government to sit down with fresh produce suppliers, really understand the way the trade is undertaken, and tighten up the draft to make sure it will really hold the supermarkets to account,” he said.
“We were hoping that the code would be more prescriptive in forcing the supermarkets to be much more transparent.
“We want to know how they determine the volumes they’re going to sell, how they’ve arrived at [what they say] is the market price.”
AusVeg CEO Michael Coote said the exposure draft addressed many underlying causes of the power imbalance between growers and retailers.
But its effectiveness will depend on implementation and future enforcement, as well as ensuring suppliers are effectively trained on the new code.
He said AusVeg was also eager to see the findings of the ACCC supermarkets inquiry, and hoped there was scope to adjust the code further based on any of its relevant recommendations.
NSW Farmers principal economist Samuel Miller said the organisation held concerns that the draft code was not fit for purpose and should be strengthened to ensure supermarkets could not “get away with unconscionable behaviour”.
“Big fines for bad behaviour are good in theory – but the Code Supervisor and ACCC need to be able to actively monitor the supply chain to ensure that growers are getting fair prices and contract terms,” he said.
“The ability for mediators to implement enforceable actions is another good step, but growers also need to be able to report breaches of the code without fear of retribution, and they can’t do that the way the role of mediators is currently set up.”
– TND
