Following New Zealand’s recent moves towards creating a local code of conduct for the highly concentrated grocery sector, Australia has now come under the spotlight regarding its own code.
One of the main red flags regarding its effectiveness has been the almost zero number of complaints handled by designated code arbitrators. These are individuals designated by each signatory retailer that a food brand/supplier can turn to with a written complaint if they do not deal directly with the retailer or choose not to go the direct route.
Australia’s four signatory retailers to this code are its four largest supermarket chains – Coles, Woolworths, ALDI and Metcash – and each have their own Code Arbiter, who is allowed to engage in ‘informal discussions’ with complainants.
The scheme was intended to ensure that brands and suppliers do not suffer any retaliation from retailers, but there appears to be almost no trust in this process.
According to data from the Australian Treasury, among the four major retailers, only two complaints were received in the fiscal year 2021 to 2022, and only two in the previous year, all directed at Coles.
As such, the Australian Treasury has launched a public consultation to review these dispute resolution provisions, hoping to gather feedback to implement useful changes to the code.
“Very few vendor complaints have been filed with code arbitrators about the [previous] two years,”the ministry said through formal documentation.
“There are several possible explanations for this, including that perhaps the Code is having a positive effect on the industry or that retailers are properly resolving disputes directly. [but it is also possible that] vendors are unaware of the role of code umpires or are concerned about raising complaints to code umpires [for various reasons] including fear of damaging the business relationship or fear of retaliation.
It is also worth noting that none of the vendors who have approached Coles Code Arbiter, former Victorian Prime Minister Jeff Kennett, in the past two years have been successful in their case or received any compensation.
Not fit for purpose
The code also has an independent grocery code reviewer appointed directly by the government, and the current incumbent, Chris Leptos, has also called for changes to the code.
“Australia has a highly concentrated supermarket sector, with the four largest players accounting for over 80% of the market share in 2020-21. [and] Their relative size gives them considerable bargaining power when negotiating with suppliers.”said.
“Many suppliers believe they cannot negotiate vigorously with the big supermarkets due to the risk of being relegated or delisted, and the resulting drop in sales volume means their unit costs would rise dramatically.
“Some suppliers also believe that they cannot frankly complain to supermarkets when supermarket purchasing teams misbehave, because the likelihood and consequence (perceived or actual) of retribution is significant.
“There is practically No complaints have been processed in recent years through the mechanisms of the Code, although I do receive many informal complaints: [showing that] the formal Complaints process in the Code is not fit for purpose.”
Leptos also noted that the level of trust in Code Arbiters is low, which is a serious problem in an environment where whistleblowers are afraid to approach retailers directly for fear of retaliation.
“The problem that has been putting suppliers off, in addition to fears of retaliation from retailers, is that they are required by the Code to register to file a formal complaint. [and] Many may not realize that there are strong confidentiality protections built in.”said.
“Each of the Big Four supermarkets also has a code arbitrator with the power to impose binding determinations of up to A$5 million to compensate suppliers for any damages caused by adverse actions by retailers.
“Code arbitrators should also be aware of the possibility of retaliation against vendors once a complaint is filed: [and] Based on the evidence I see, vendors to date have not had a high level of confidence in the protections afforded to them by code arbitrators.”
Currently, the code is signed by retailers on a voluntary basis; a new review on the possibility of making it mandatory will be released later this year.