After lengthy negotiations, the Australian Food and Grocery Council (AFGC), Coles and Woolworths have agreed the Food and Grocery Prescribed Industry Code of Conduct (Code).

As a prescribed industry code, the Code applies to grocery retailers who have voluntarily agreed in writing to be bound by it.  Retailers who have agreed to be bound by the Code must deal with their suppliers in accordance with the manner set out in the Code.

The Code aims to regulate standards of business conduct in the food and grocery supply chain and to ensure transparency and certainty in commercial transactions.  It sets out obligations and principles relating to aspects of trading relationships between retailers and their suppliers.

Key aspects, obligations and principles of the Code include:

  • Requirements for retailers to enter into written Grocery Supply Agreements that are consistent with the Code in order to trade with suppliers;
  • Prohibitions on retailers demanding payment for promotions, wastage and losses that occur after a retailer has taken possession of the supplier’s grocery;
  • Restrictions on retrospective and unilateral variations to Grocery Supply Agreements;
  • Obligations on retailers and suppliers to always deal with each other lawfully and in good faith;
  • Requirements for a retailer de-listing a supplier’s grocery products;
  • Greater transparency on the principles of shelf allocation for branded and retailer’s house-brand products;
  • Recognition of the importance of intellectual property rights and confidentiality;
  • More avenues for dispute resolution including appointment of Code Compliance Managers by retailers to deal with a supplier’s complaints;
  • Greater compliance and reporting requirements including retailers providing copies of the Code and training on the Code to all buying team staff members; and
  • The establishment of a Code Committee to monitor the operation of the Code and to provide annual summary reports to the ACCC.

Breaches of these requirements will constitute breaches of the Competition and Consumer Act 2010 (Cth) (Act).  As such, the ACCC may take action against a retailer who has signed up to the Code for any breaches.

In order to become a prescribed code under the Act, the Code will now need to go through a Government approval process.  It is hoped that, in addition to Coles and Woolworths, other retailers and industry groups will agree to sign up to the Code.