The Australian government announced on Monday that it is considering implementing billion-dollar fines on major supermarket chains that do not follow an industry code of conduct. This decision is aimed at addressing concerns regarding the unfair pricing practices that suppliers have been subjected to.
Under the new regulations, grocery stores with annual revenue exceeding A$5 billion ($3.3 billion) – which currently includes Woolworths, Coles, ALDI, and Metcash – will be required to comply with the code of conduct. Previously, adherence to the code was voluntary.
The government’s decision follows a report by former competition minister Craig Emerson, which highlighted that the existing code has been ineffective in rectifying the power imbalance between supermarkets and their suppliers, including farmers.
Supermarkets in Australia could be fined up to 10% of their annual turnover for violating a new code that focuses on their interactions with suppliers. In 2023, Woolworths reported food sales of A$48 billion, Coles earned A$37 billion, and Metcash had A$10 billion in sales. ALDI’s earnings are not publicly disclosed.
Treasurer Jim Chalmers, agriculture minister Murray Watt, and competition minister Andrew Leigh issued a joint statement emphasizing the importance of fairness for families and farmers. The federal government has expressed its intention to prioritize the implementation of mandatory laws for the code.
The review of the supermarket sector in Australia is one of six government inquiries currently underway. Experts argue that the industry is highly concentrated, with Woolworths and Coles, the top two grocers, accounting for two-thirds of all Australian grocery sales.
Woolworths and Coles representatives have stated that they will carefully consider the recommendations of the report and the government’s response. Both companies are committed to supporting a sustainable grocery sector. ALDI Australia also expressed their support for making the code of conduct mandatory and stated that they are currently reviewing the final recommendations. Unfortunately, a representative for Metcash was unavailable for comment at the time. The National Farmers Federation believes that these changes will provide grocery suppliers with a better platform to address concerns when they feel that a major customer is exploiting its market power to drive down wholesale prices. Charlie Thomas, the acting CEO of the federation, stated that these changes will finally give the code the necessary strength to protect farmers and that a code with strong deterrents is crucial to influencing behavior in the supply chain. Additionally, a separate inquiry into consumer pricing by the Australian Competition and Commission is expected to release its findings in February 2025.
(1 US dollar is equal to 1.5074 Australian dollars)