Australia's ACCC cracks down on grocery code of conduct while NZ shuns the need for one

As Australia's competition watchdog investigates the way some supermarket retailers are following a new Food and Grocery Code of Conduct, talk of introducing a similar code in New Zealand has stalled.

In the latest round of a long-running investigation into supplier complaints, the Australian Competition and Consumer Commission has accused Aldi and Woolworths, which owns Countdown in New Zealand, of limiting negotiations over new grocery supply agreements. The ACCC is concerned at the lack of detail provided in some GSAs about the circumstances when payments may arise.

Australia's voluntary code aimed to fix any imbalance in bargaining power between suppliers and large grocery retailers by banning unfair conduct. Last December, Coles was fined A$10 million and costs after legal action by the ACCC over unconscionable conduct in 2011 in its dealings with certain suppliers, with Federal Court Judge Michelle Gordon saying Coles' "practices, demands and threats were deliberate, orchestrated and relentless".

Talk of introducing a voluntary code in New Zealand emerged last year after former Labour MP Shane Jones accused Countdown under Parliamentary privilege of bullying its suppliers. A subsequent Commerce Commission investigation which sparked 90 complaints found in November that the supermarket chain had not breached any of the laws the watchdog enforces and that it would be taking no action.

Former Commerce Minister Craig Foss said last year he was keen on a voluntary grocery code of conduct, but left it up to New Zealand's two duopoly players, Countdown and Foodstuffs, to lead the way.

Foodstuffs said it already operates under its own clear set of Supplier Partnership Guidelines, developed with input from the New Zealand Food and Grocery Council, which represents mainly larger suppliers. Managing director Steve Anderson said the policy, first published in 2011, outlines it expectations for staff conduct in dealing with suppliers that include acting with "honesty, fairness, integrity, and courtesy."

The policy includes a commitment that any unresolved issues can be confidentially referred to any of the group's three managing directors. "As such, we have confidence that our internal processes and policies are achieving an outcome that is broadly comparable to that of an industry code of conduct," he said.

Progressive-owned Countdown said it was "open to the principle of a code of conduct though it would need to include all industry participants and add certainty and clarity for both suppliers and retailers", it said in an emailed statement.

"Importantly, any code shouldn't add complexity or increase the cost of food for New Zealanders," it said.

Commerce Minister Paul Goldsmith, also in an emailed statement, said that following the Commerce Commission investigation finding into Countdown he was unconvinced the industry requires regulation.

"Ultimately it is up to individual supermarket brands to decide if they wish to enter into any similar kind of arrangement. Each brand could also choose to enter into voluntary agreements with their suppliers at any time," he said.

The UK has gone the other way and beefed up its regulation. It was the first to introduce a Grocery Supply Code of Practise in 2010 covering the 10 largest grocery retailers after the industry failed in a self-regulatory approach. In 2013 an adjudicator, Christine Tacon, was appointed to enforce the code and she was also given statutory power this year to impose penalties of up to one percent of supermarkets' annual UK turnover for code breaches.

Tacon has already dealt with one of the top five issues suppliers have complained about and launched her first investigation, which is on-going, into Tesco's treatment of its suppliers. Tacon's preferred approach is negotiating to get changed industry behaviour and views the financial penalties she requested as a last resort.

The Green Party has called for a compulsory code of conduct in New Zealand, claiming the two main supermarket chains have too much power by controlling over 90 percent of grocery retail and that voluntary codes in the UK and Australia have struck problems because of the imbalance in power between negotiating parties.

Green consumer spokesperson Mojo Mathers tabled a member's bill in July this year calling for the appointment of a grocery adjudicator under the Commerce Act without which any code would be toothless, she said. The bill is one of many awaiting sufficient ballot votes for it to be debated in the House, which occurs fortnightly for members' bills.

Mathers said New Zealand's supermarket sector is even less competitive than Australia's. Market consolidation meant supermarkets were able to dictate terms and conditions and prices to suppliers, she said. This posed a long-term risk to consumer interests as well as to suppliers, in particular to small scale suppliers and growers who could be forced out of business by anti-competitive practises. That would have a detrimental impact on consumer choice, she said in the bill.

(BusinessDesk)