The Australian Food and Grocery Council (AFGC) Annual Industry Leaders Forum was held on Wednesday 1 October 2014 at Parliament House in Canberra. The Forum presents a once-a-year opportunity for members to hear from key federal Government Ministers, regulators and stakeholders in the food and grocery industry.

This year’s event saw an impressive line-up of speakers – including Prime Minister Tony Abbott, Chairman of the ACCC, Rod Sims, and the Chair of the Competition Policy Review, Professor Ian Harper – who addressed issues directly affecting the food and grocery industry, as well as Australian businesses more broadly. While last year the focus was on the opportunities presented as Asia’s food bowl, this year a recurring theme throughout presentations was improving the competitiveness of industry and innovation. Unsurprisingly, the draft Harper Review into the effectiveness of Australian competition law dominated the Forum, with the proposed Supermarket Code of Conduct and progress on free trade agreements also featuring prominently.

Melissa Monks, Special Counsel, attended the Forum and provides some of the highlights and items of interest below.

ACCC Chairman Rod Sims – “Food and Grocery and Australia’s competition law”

Mr Sims provided an update on the ACCC’s work and focus on credence claims in the food sector (see our previous post and Agribusiness article),h has been a priority for the Commission over the last couple of years and seems set to continue to remain so for sometime yet.

Mr Sims also highlighted the regulator’s focus on product safety, with a warning that all supply chain participants should have effective quality assurance processes in place to prevent unsafe products being supplied to market, particularly “where companies look to reduce costs by sourcing products from overseas manufacturers” – a timely reminder to businesses in all industries which import goods that the ACCC is keeping a close watch on product safety in this space.

On the Supermarket Code of Conduct, Mr Sims acknowledged that it goes some way to addressing unfair practices in the grocery sector by providing clear rights and legally enforceable norms of conduct. However, he highlighted concerns about whether the Code will in fact address problems of unfair transfer of risk from supermarkets to suppliers and unilateral changes to the terms of trade by supermarkets that had been identified by the food and grocery industry given many of the protections of the Code are qualified and retailers and suppliers are able to agree to ‘contract out’ of Code provisions. Mr Sims referred to the action commenced this year by the regulator against Coles alleging unconscionable conduct towards suppliers, and interestingly noted that these proceedings are part of a broader investigation and that we should expect further action shortly.

Turning to the Harper Review, Mr Sims emphasised the ACCC’s strong agreement with the panel that “there is a need to reinvigorate Australia’s competition policy, and ensure that it evolves”. He identified two specific areas of recommended reform relevant to the food and grocery industry: transport infrastructure and liner and coastal shipping services to, amongst other things, reduce costs. Mr Sims also took the opportunity to note the ACCC’s support for the review panels’ review of Australia’s competition law. In particular he reiterated the ACCC’s support for the recommendations made in respect of extending section 45 of the CCA to cover concerted practices to bring Australia in line with many overseas jurisdictions, and reform to section 46 of the CCA to make the section “workable and more focused on the competitive process rather than the protection of individual competitors”.

The Hon. Tony Abbott MP 

Mr Abbott’s address to the conference was premised on a repeat of the “open for business” mantra that the Government has touted since election, and the Government’s commitment to fiscal responsibility to build a strong and prosperous economy.

Mr Abbott reiterated the Government’s commitment to reducing regulation, referencing the Government’s Red Tape Repeal Day on 26 March 2014 when “more than 9,500 unnecessary or counter-productive regulations and a full 1,000 redundant acts of Parliament were removed”. However, at this stage there does not appear to have been any changes to regulations specifically related to food and grocery. Mr Abbott announced a second repeal day on 29 October 2014.

Another focus of Mr Abbott’s speech was free trade and Australia becoming the “food bowl of Asia” noting finalisation of the free trade agreements with Japan and Korea had been finalised, and that the government hopes to do the same in respect of China soon.

Professor Ian Harper, Chair, Competition Policy Review 

Professor Harper’s address to the Forum related to the recent release of the Draft Report of the Competition Policy Review (see our alert) and factors such as globalisation, an ageing population and digital reform being the key drivers for reform since the Hilmer review 20 years ago.

In particular, given the level of interest this has generated, Professor Harper spoke at length about the proposed change to section 46 to introduce an effects test. Professor Harper stated that the recommendation would “line up section 46 with the rest of the Act” where many other sections of Part IV were premised on both a purpose or effects test and that this was not a new test or new concept. Like Mr Sims, he also noted that reform to section 46 would shift the section from focussing on damage to competitors to more appropriately be about the competitive process.

Professor Harper particularly emphasised the draft nature of the Report and the fact that the panel had based this on the information they received, and declared the willingness of the panel to “change our mind” particularly in light of other information that may be presented in the next round of submissions.

The Draft Report includes a number of recommendations relevant to the food and grocery industry such as removal of regulatory barriers aimed at strengthening competition in the industry, support for the introduction of a supermarket industry code and changes to planning and zoning legislation. The Draft Report also specifically recommends removing restrictions on goods that can be sold in supermarkets, including limitations on the sale of alcohol and pharmacy products, and supports enforcing business-to-business unconscionable conduct.

Other speakers

A number of other speakers presented at the Forum including:

  •  Bruce Billson MP, Minister for Small Business, who spoke about the implementation of the Supermarket Code and the Government’s commitment to implementing the Code within the original 12 month timeframe. Mr Billson also noted the proposed extension of the unfair terms regime to small businesses, however no commitment was given to timing for any such change or substance provided about what the reform may look like.
  • Ian Macfarlane MP, Minister for Industry, spoke about the advantageous geographic position that Australia has in relation to Asia and went through a number of initiatives the government has been working on in this area, specifically the free trade agreements with Japan and Korea, discussions with China and optimism for an agreement with India.
  • Senator Fiona Nash, Assistant Minister for Health, addressed the Forum on the Government’s approach to educate rather than regulate and encourage rather than mandate in the area of health reform. Ms Nash touched briefly on the controversial healthy food star rating system (see our alert on this topic) noting that the system would be voluntary and reviewed in two years, although she offered no insight into what would occur at this time if there was a failure in uptake of the new system.

Industry response

The challenges for the industry which the AFGC reports include high input costs, low margins, rising gas prices, the impact of the strong Australian dollar on exports and restrictive, complex and overlapping regulatory structures. Nevertheless, industry attendees were generally optimistic about the messages from the Forum, particularly the apparent importance that Government places on the food and grocery sector and its commitment to reducing regulatory burdens and reforming competition and labour laws.