Woolworths and Coles face billion-dollar fines under stronger grocery code

“Making the code mandatory is essential to ensuring it is effective in addressing the heavy imbalance in market power between supermarkets and their suppliers, especially their smaller suppliers.”

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Supermarket giants would be fined up to $10 million, three times the benefit they gained from the breach, or 10 per cent of their annual turnover – whichever is highest – for the most serious violations of the code.

Emerson said those tougher penalties should apply when supermarkets don’t deal with their suppliers lawfully or in good faith, or when they fail to keep written supply agreements, train staff on their obligations under the code, or keep records.

For smaller breaches, the penalty amount has been lifted to $187,800 from $15,650.

“The penalties for breaches of the mandatory code that I am recommending are the heaviest of any industry code of conduct. I have also recommended improved dispute-resolution processes,” Emerson said.

While the code can’t impose binding arbitration on a company, Emerson said the four supermarket companies had given their in-principle agreement to be bound by the decisions of independent arbitration, and to award compensation of up to $5 million.

The Albanese government commissioned Emerson’s review in January amid growing outcry that supermarkets were failing to pass savings to consumers, even as the prices paid by the big retailers for meat, fruit and vegetables were falling. It sits alongside a separate Australian Competition and Consumer Commission supermarket pricing inquiry due early next year.

The strengthened code is mainly aimed at improving protections for Australian suppliers given concerns that the current, voluntary code – which the major players are already signed up to – has been insufficient in guaranteeing fair treatment. Only six disputes have been lodged since 2021.

Emerson’s report said food and grocery suppliers had no choice but to deal with Woolworths, Coles, ALDI and Metcash if they were to succeed in Australia. But they feared retribution from those supermarkets if they raised complaints or exercised their rights under the code.

Examples of retribution included a supermarket delisting their product, rejecting their fresh produce at late notice for non-genuine reasons, assigning inferior shelf space out of eye level or reach, and imposing long delays on restocking their products once they’re sold out.

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Stakeholders could not be contacted for comment because the report was given to media under embargo. But when its interim recommendations were published in April, Opposition Leader Peter Dutton said they would not reduce prices for shoppers at the checkout. “They are not going to be the solution consumers are looking for,” he said.

In his final report, Emerson said his measures would help consumers “by enabling suppliers to earn sufficient returns to innovate and invest in new technologies to provide better products at lower cost”.