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Intense public scrutiny of supermarkets is nothing particularly new.
Nine years before the current focus on high prices and allegations of price gouging, a code of conduct was set up to address the market imbalance between major retailers like Woolworths and Coles and their suppliers.
Jump forward to the present day and issues clearly still remain, with an interim report from Dr Craig Emerson into the code of conduct concluding it needs a major overhaul.
The government-ordered review found the code, as it currently stands, is toothless, "leaving the competition watchdog chained up on the back porch".
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It comes after a 2023 report found more than a third of Australian vegetable producers were considering leaving the industry within a year, in part due to price pressure from retailers and tightening margins.
So what actually is the code of conduct, why doesn't it work so well, and is anything actually going to change?
What is the supermarket code of conduct?
Introduced in 2015, the Food and Grocery Code of Conduct is an agreement that aims to improve business behaviour in the supermarket sector, particularly in regard to the relationships between retailers, wholesalers and their suppliers.
While suppliers are automatically covered by the code, it is completely voluntary for supermarkets.
Woolworths, Coles, Aldi and Metcash (which owns IGA) have all signed up.
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What do supermarkets have to do under the code?
There are a number of obligations for supermarkets under the code, including the underlying principle that they act in good faith when they deal with their suppliers – including during negotiations, when setting up supply agreements and when resolving disputes.
However, the code doesn't actually define what "good faith" entails.
It instead outlines a number of factors that would be considered when judging whether something is in good faith, such as acting honestly and without retribution or duress.
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Supermarkets also have to appoint their own code arbiter, who will investigate and propose solutions to disputes under the code.
However, a review of the code released last year heard that suppliers were concerned about the lack of independence of those arbiters, which in turn leads to a lack of formal complaints.
Since arbiters were introduced in 2021, they've received a grand total of five complaints across all four supermarkets, and Woolworths and Coles didn't receive a single one between them in 2022-23.
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What happens if supermarkets breach the code?
Suppliers can lodge formal complaints to the relevant arbiter if they feel a supermarket has breached the code in their dealings.
But this is where we arrive at one of the main criticisms of the code. Because it is voluntary, there are no real consequences for supermarkets that don't meet their obligations.
This was acknowledged by Emerson, who said proper penalties in a mandatory code were needed in his interim report.
"The existing Food and Grocery Code of Conduct is not effective," he wrote.
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"It contains no penalties for breaches and supermarkets can opt out of important provisions by overriding them in their grocery supply agreements.
"I firmly recommend the Code be made mandatory and apply to all supermarkets with annual revenues exceeding $5 billion, which at present are Coles, Woolworths and ALDI, and wholesaler, Metcash…
"Effective penalties must apply for breaches of the mandatory Code."
Supermarkets say the paltry number of complaints shows the relationships between them and suppliers are running smoothly.
But critics, including Emerson, say suppliers' fear of retribution from supermarkets is behind the lack of complaints made.
"The code should be strengthened to better protect suppliers, with new protections against retribution, since suppliers' fear of retribution compromises the code's effectiveness," he wrote.
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Is the code going to change?
Probably, but we don't know for sure yet.
Emerson's interim report, released on April 8, made eight "firm" recommendations to the government about the code.
They include that it be made mandatory, and that it include the power to impose fines of $10 million or more to supermarkets who breach the code.
The report does not, however, recommend forced divestiture powers to break up supermarkets' market share, which has been called for by the Greens and Nationals.
There are a further three draft recommendations in the interim report that Emerson wants further consultation on. You can read the full list below.
The final report and its recommendations will be delivered by June 30. The federal government will then have to decide whether to accept them or not.
It hasn't indicated whether it will yet, but Prime Minister Anthony Albanese said when the review was launched that he "will not hesitate to take action" if it's required.
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Interim report into supermarket code recommendations
'Firm' recommendations
1. The Food and Grocery Code of Conduct should be mandatory.
2. A Code Supervisor (previously the Code Reviewer) should produce annual reports on disputes and on the results of confidential supplier surveys.
3. Penalties for non-compliance should apply, with penalties for more harmful breaches of the Code being the greatest of $10 million, 10 per cent of turnover, or 3 times the benefit gained from the contravening conduct. Penalties for more minor breaches would be 600 penalty units ($187,800 at present).
4. All supermarkets that meet an annual revenue threshold of $5 billion (indexed for inflation) should be subject to the mandatory Code. Revenue should be in respect of carrying on business as a 'retailer' or 'wholesaler' (as defined in the voluntary Code). All suppliers should be automatically covered.
5. The Code should place greater emphasis on addressing the fear of retribution. This can be achieved by including protection against retribution in the purpose of the Code and by prohibiting any conduct that constitutes retribution against a supplier.
6. As part of their obligation to act in good faith, supermarkets covered by the mandatory Code should ensure that any incentive schemes and payments that apply to their buying teams and category managers are consistent with the purpose of the Code.
8. To guard against any possible retribution, supermarkets covered by the mandatory Code should have systems in place for senior managers to monitor the commercial decisions made by their buying teams and category managers in respect of a supplier who has pursued a complaint through mediation or arbitration.
10. A complaints mechanism should be established to enable suppliers and any other market participants to raise issues directly and confidentially with the ACCC.
Draft recommendations
7. The mandatory Code should include informal, confidential and low-cost processes for resolving disputes, and provide parties with options for independent mediation and arbitration. This could be achieved by:
- Adopting the dispute-resolution provisions of other industry codes, which provide for independent mediation and arbitration;
- Allowing for supermarket-appointed Code Mediators to mediate disputes, where agreed by the supplier, and recommend remedies that include compensation for breaches and changes to grower supply contracts; and
- Allowing suppliers to go to the Code Supervisor (previously the Code Reviewer) to make a complaint; to seek a review of a Code Mediator's processes; or to arrange independent, professional mediation or arbitration.
Supermarkets are encouraged to commit to pay compensation of up to $5 million to resolve disputes, as recommended by the Code Mediator and agreed by the supplier, or as an outcome of independent arbitration.
9. Specific obligations under the Code should set minimum standards that cannot be contracted out of in grocery supply agreements or otherwise avoided.
11. The Government should consider increasing infringement notice amounts for the Code.
