Australia’s federal government announced plans to impose billion-dollar fines on major supermarket chains that fail to comply with a mandatory industry code of conduct, aiming to address concerns that suppliers have been unfairly pressured on pricing. The new regulations will apply to grocers with annual revenues exceeding A$5 billion ($3.3 billion), including Woolworths, Coles, Germany’s ALDI, and wholesaler Metcash.
Previously voluntary, the code of conduct will become mandatory following a report by former competition minister Craig Emerson. The report found that the current code was inadequate in addressing the bargaining power imbalance between supermarkets and their suppliers, including farmers. The new rules will impose fines of up to 10% of annual turnover for breaches, focusing primarily on dealings with suppliers.
In 2023, Woolworths reported Australian food sales of A$48 billion, Coles A$37 billion, and Metcash A$10 billion. ALDI does not disclose its earnings. The federal government emphasized that this move is designed to ensure fairness for both families and farmers, as stated by Treasurer Jim Chalmers, agriculture minister Murray Watt, and competition minister Andrew Leigh.
The government aims to prioritize passing laws to enforce the mandatory code, which is part of a broader effort involving six inquiries into the country’s supermarket sector. Australia’s grocery industry is noted for its high concentration, with Woolworths and Coles together controlling two-thirds of the market.
Representatives from Woolworths and Coles expressed their commitment to reviewing the report’s recommendations and supporting a sustainable grocery sector. An ALDI Australia spokesperson also supported the mandatory code and is reviewing the final recommendations. Metcash affirmed its commitment to the code and its intent to work with suppliers to be their partner of choice.
The National Farmers Federation welcomed the changes, stating that the new regulations would make it easier for grocery suppliers to voice concerns about unfair market practices. Acting CEO Charlie Thomas highlighted the need for strong deterrents within the code to protect farmers and influence behavior within the supply chain.
In addition to these changes, a separate inquiry into consumer pricing by the Australian Competition and Consumer Commission is scheduled to report its findings in February 2025. The combined efforts aim to enhance fairness and transparency in Australia’s supermarket sector, ensuring that both suppliers and consumers benefit from a more balanced and equitable market environment.
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