The two major supermarkets have agreed to a voluntary code of conduct designed to level the playing field between the major retailers and their suppliers. Joining me to discuss how to the voluntary code will work and what it will mean for competition in the sector is Laura Hartley, who's the Managing Partner at Addisons; Laura thank you so much for joining us.
Thanks for having me.
Now Laura firstly what will the code cover and do you think it has some teeth?
The voluntary code is an opt in code, so as you've said Coles and Woolworths are the two retailers who've agreed to abide by the Code, mind you they're the two retailers who suppliers would say need to agree to abide, so we don't have Metcash or Aldi abiding by this code; that's the first thing, so opt in by retailers. The second thing is the code is quite a detailed code, 17 pages of quite detailed provisions and a lot of time has obviously been put in to negotiating that over a 14 month period now. And for those who are outside the industry they'll probably be a bit gobsmacked by some of the provisions in this code because you see the flavour for what suppliers have been alleging retailers have been doing or rather Coles and Woolworths have been doing over years. So the code covers the retailers not imposing a constant barrage of fees by different names on those retailers, not unilaterally varying contracts, not retrospectively imposing fees on suppliers and operating in good faith, they're the main sort of flavour or themes of this code.
Well given that it is a voluntary code what happens if one of the retailers breaches the code, will there be penalties?
No unfortunately that's where the code doesn't quite go far enough. So the code will become a prescribed code under the Competition Act, that means that suppliers can take action for breach of the code, they can get damages, they can obtain an injunction so can the ACCC, but there are no penalties for breach of this code and we've seen under the competition law that penalties are in fact the most effective way to get compliance in an industry with these laws, so that's where unfortunately this code does not just go that next step to the penalty level.
And Laura you mentioned the ACCC and of course the ACCC is currently investigating the misuse of market power by the major retailers when it comes to favouring their own house brands; does this code cover the misuse of market power?
The code tries to get a level playing field between suppliers and retailers that's really the main tenant of the code, I don't think it will address necessarily misuse, I mean a supplier could still enter into a very unfavourable contract with a retailer and just because the clauses are transparent and set out there it can still be bound by that very unfavourable set of terms. I think we're going to have wait for the government inquiry both into misuse of market power and the ACCC's inquiry into misuse of market power to actually address that imbalance that currently exists in the industry.
So would you call it a win for suppliers?
I'd call it a small step for suppliers and a small step by Coles and Woolworths but not a giant leap for the industry.