Woolworths and Aldi have now responded to the Australian Competition and Consumer Commission (ACCC) announcement last week that they each were being investigated for alleged breaches of the new Food and Grocery Code of Conduct (the Grocery Code). 

 

The ACCC is investigating supplier allegations that  Woolworths and Aldi each presented Grocery Supply Agreements (GSAs) to their suppliers in a way that made them appear non-negotiable.

 

The Grocery Code is aimed at strengthening  the Competition and Consumer Act which came into effect in March 2015.

 

The ACCC investigation

 

ACCC Chairman Rod Sims said concerns centered around the presentation and details of GSAs.

 

“The ACCC has concerns as to the manner in which some retailers, in particular Woolworths and Aldi, are presenting new Grocery Supply Agreements, which might have the impression that the supplier is not able to negotiate the terms of the GSA,” said Chairman Rod Sims.

 

“The ACCC is also concerned about the low level of detail provided in some GSAs regarding the circumstances in which payments may arise,” said Chairman Sims.

 

According to the ACCC, the Grocery Code is aimed at ensuring retailers provide certainty to suppliers due to their likelihood of holding weaker bargaining positions with retailers. The Grocery Code prohibits retailers from engaging in certain types of unfair conduct in dealings with suppliers and provides a framework for supplier-retailer dealings by requiring parties agree to code-compliant GSAs.

 

GSAs can be re-negotiated to opt-out of some Grocery Code provisions but only by consent from both parties and with detailed circumstances setting out when the opt-out applies.

 

The Grocery Code provisions also set rules on payments (such as prohibiting payment requests for food wastage), termination of agreements, dispute resolution and require retailers to deal with suppliers in good faith.

 

The ACCC is responsible for enforcing the Grocery Code and has developed publicly-available guidance materials.

 

“The aim of the Grocery Code is to redress the imbalance in bargaining power that can exist between suppliers and large grocery retailers by prohibiting certain types of unfair conduct,” ACCC Chairman Sims said.

 

The situation will continue to be monitored by the ACCC.

 

Woolworths response

 

In response to the investigation, Woolworths said it is a strong supporter of the Grocery Code and that the supermarket has been working progressively with suppliers to implement it.

 

“A minor wording issue was raised with us in relation to a letter sent to a number of our suppliers offering to amend agreements to amongst other things comply with the Grocery Code,” said Woolworths in its statement addressing the matter.

 

“The wording in question has been used in letters to our suppliers for many years and was designed to avoid changes to agreements being missed or misunderstood.  Wanting to deal with this issue promptly, two weeks ago we changed the paragraph in the relevant letter. We re-sent letters to suppliers, and at the ACCC’s request have agreed to contact suppliers who have already signed new agreements,” Woolworths said.

 

The supermarket’s statement continued on to say that the Grocery Code process has worked exactly as it was intended to, and that Woolworths had responded quickly and constructively.

 

Woolworths also said it was surprised and disappointed over the ACCC’s press release which the supermarket claims did not recognise its prompt actions. Woolworths stated that the ACCC only raised additional, new concerns with them only hours before contacting the media.

 

Aldi response

 

An Aldi spokesperson said that Aldi supermarkets have always supported a strong and sustainable grocery industry for retailers, wholesalers and suppliers.

 

“We respect the role of the ACCC in maintaining a fair and compliant food and grocery industry, and will respond in due course to the specific claims that have been brought to our attention,” said the spokesperson.

 

“Aldi’s commitment to sign and implement the Food and Grocery Code 2015 before any other major supermarket is testament to our business values and dedication to quality supplier relationships,” said Aldi’s spokesperson.

 

“The spirit of the [Grocery] Code reflects Aldi’s current practice with suppliers; forging long term, sustainable relationships and working in partnership to provide Australian shoppers with high-quality products at permanently low prices.”

 

Previous articles:

 

• Renewed calls for supermarkets to sign Grocery Code of Conduct (May 2015)
• ALDI to opt in to the Federal Government’s Food and Grocery Code of Conduct (March 2015)
• Australia’s new mandatory Franchising Code of Conduct comes into effect (January 2015)