After a number of years in the making, the Food and Grocery Code of Conduct was last month declared to be a legally enforceable, voluntary prescribed code under the CCA.
The Code governs certain conduct by retailers and wholesalers in their dealings with suppliers, introducing certain minimum standards of conduct (including a requirement for supply agreements and terms regarding termination, dispute resolution, IP, payments, etc) and obligations of good faith. It’s voluntary so it applies only to retailers and wholesalers who elect to be bound by it - one of the key criticisms levelled at the Code.
Notably, the ACCC is responsible for ensuring compliance with the Code, which it has as one of its 2015 enforcement priorities. The ACCC will be keen to send an early message of compliance and deterrence to the food sector about its approach to Code enforcement, and will be actively looking for a test case.
While there are no financial penalties for a breach of the Code, the ACCC can pursue a range of other remedies including court ordered injunctions and contract variations. Of most significance is the power for the ACCC to undertake audits - requiring businesses to produce certain documentation within 21 days - a power which will give it direct access to information and greater insight into the dynamics of supermarket-supplier relationships. The constant threat of an ACCC audit could act as a deterrent, keeping parties vigilant and compliant.
Signatories to the Code will need to ensure all new grocery supply agreements comply with the Code’s terms and if not, consider making amendments within the transition timeframes, as well as move quickly to train staff on their obligations and update internal procedures for compliance. It will benefit both sides of the fence to know and understand the Scope of the Code.