Australia said on Monday, June 24, that large supermarket chains that violate an industry code of conduct risk penalties up to billions of dollars in an effort by the federal government to allay concerns that suppliers have been unjustly pressured into raising prices.

Mandatory Code of Conduct

In a report by Reuters, the federal government said that the previously optional code of conduct would now be mandatory for grocery stores with yearly revenues of more than A$5 billion ($3.3 billion). This now includes Woolworths, Coles, Germany's ALDI, and wholesaler Metcash.

In the event that the supermarkets violate the code, which primarily governs their interactions with suppliers, they may be fined up to 10% of their yearly revenue.  

The government reiterated its intention to make the code obligatory via the passage of legislation.

The change was announced in response to a study by former competition minister Craig Emerson, who concluded that the existing code did not adequately handle the power imbalance between supermarkets and their suppliers, particularly farmers.

The nation's grocery industry, which analysts claim is among the world's most consolidated, is the subject of six separate investigations by the government. The study by Emerson is one of them.

According to the National Farmers Federation, these modifications will empower grocery suppliers to speak out when they see a major client abusing their market dominance to reduce wholesale costs.

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What Retailers Have to Say

Woolworths and Coles representatives both said that their firms would take the government's reaction and the report's suggestions into consideration.

A representative from ALDI Australia said that the firm was looking at the final suggestions and that they were in favor of making the code of conduct mandatory.

A Metcash spokesperson reaffirmed the firm's dedication to the code of conduct and promised to continue collaborating with suppliers in an effort to earn their trust.

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