Suppliers shelf-conscious

SUPERMARKET suppliers have been threatened with cuts to their product ranges or shelf space unless they lower their prices with the subsequent savings not passed on to shoppers, a government review has heard.

A review of the nation’s $100 billion supermarket sector has also detailed complaints from suppliers about supermarkets refusing to accept a price increase driven by rising costs such as electricity, only to then jack up the product’s shelf price and pocket the extra profit. Suppliers who have withheld goods in response to a price rise dispute have also been punished by having other lines pulled from shelves and receiving significantly reduced orders.

The complaints are listed in a draft review of the Food and Grocery Code of Conduct carried out by former competition boss Graeme Samuel.

The voluntary but legally enforceable code came into effect in 2015 after years of complaints about how supermarkets and wholesalers dealt with suppliers.

A review by Mr Samuel, commissioned by the Federal government in March, has found while relations between Woolworths, Coles and Aldi and their suppliers have significantly improved, instances of troubling behaviour persist.

“The broad feedback from across the industry indicated that there has been significant improvement in the conduct of retailers over the last three years,” the review noted.

“However, the review received a range of complaints from suppliers alleging that problematic behaviours persist at the buying level.”

Suppliers remain hesitant to raise possible code breaches with supermarkets and do not trust their dispute resolution processes, the review found.

“Stakeholder feedback stated that many suppliers are reluctant to pursue dispute resolution…due to a fear of retribution and lack of trust in the process,” it said.

Mr Samuel has called for each supermarket chain to establish an independent adjudicator modelled on the Coles arbitration process headed by former Victorian premier Jeff Kennett.

He has also called on Metcash to sign onto the code and urged the government to impose a separate code of conduct on the IGA supplier if it continues to refuse to sign onto the voluntary one.

The former head of the Australian Competition and Consumer Commission has suggested a new “fair dealings” provision replace the code’s current obligation for supermarkets to “act in good faith”.

The new provision would require supermarkets to act honestly, reasonably and provide certainty around contracts.

It would prevent them from exerting undue pressure on, or taking retribution against, suppliers.

The existing good faith provisions require supermarkets to carry out negotiations without duress.

“The current good faith provision in the Grocery Code has been difficult to apply in practice and limited in its usefulness,” the review said.

Mr Samuel is also pushing to limit a supermarket’s ability to block a price increase.

Woolworths said it treated the code as a “minimum standard of conduct” and “will be closely considering the draft report over the coming week”.