Changes to the Food and Grocery Code

The Food and Grocery Code is a voluntary code that governs certain conduct by grocery retailers and wholesalers in their dealings with suppliers. From 3 October 2020, amendments to the Code came into effect.

Changes commenced on 3 October 2020

The changes to the Food and Grocery Code (the Code) will impact you if you are bound by the Code, or if you supply grocery products to retailers or wholesalers who are bound by the Code.

The changes commenced on 3 October 2020 except for provisions on conduct relating to price increase processes (items 17 and 22 of Schedule 3), which commence on 2 January 2021.

You can find the amendments and explanatory statement at the Federal Register of Legislation website:

Dispute resolution process has changed

Under the amended dispute resolution process:

  • a Code Arbiter replaces the code compliance manager. A retailer or wholesaler who is already a signatory to the Code must appoint a Code Arbiter by 3 December 2020. Code Arbiters can investigate and propose a resolution to a dispute or complaint notified by a supplier. The Code Arbiter will have authority from the retailer or wholesaler to enter into an agreement on their behalf to settle disputes relating to their Code obligations
  • an Independent Reviewer will be appointed by Hon. Michael Sukkar, Minister for Housing and Assistant Treasurer, to (among other things) review Code Arbiters’ processes. In addition to reviewing Code Arbiters’ processes the Independent Reviewer will also, for example, work collaboratively with relevant stakeholders to identify and address emerging systemic issues and report on any findings in its annual report.

The Code Arbiter and the Independent Reviewer must observe confidentiality requirements relating to information that is disclosed or obtained in dealing with a complaint or responding to a review request. They will not be allowed to disclose to the retailer or wholesaler the identity of a supplier who has made a complaint, except with the supplier’s consent.

The Code Arbiter will prepare an annual report containing certain details of complaints that they have received and investigations that they have undertaken. This report will be published on the retailer’s or wholesaler’s website.

The Independent Reviewer will also publish an annual report on their website, as well as the result of an annual survey of suppliers, retailers and wholesalers to identify issues relating to the operation of, and compliance with, the Code.

More detail on good faith

The amended Code provides further guidance on factors that may be taken into account when deciding whether a retailer or wholesaler has acted in good faith. These are whether the retailer or wholesaler has:

  • acted honestly
  • cooperated to achieve the purposes of the agreement with the supplier
  • not acted arbitrarily, capriciously, unreasonably, recklessly or with ulterior motives
  • not acted in a way that constitutes retribution against the supplier for past complaints and disputes
  • observed any confidentiality requirements relating to information disclosed or obtained in dealing with or resolving a compliant or dispute with the supplier.

Changes to negotiating price rises

There are new rules around price rise processes to:

  • encourage retailers or wholesalers to engage with price increase notifications from a supplier and respond in a timely way
  • prohibit the retailer or wholesaler from requiring suppliers to disclose commercially sensitive information at any stage during the process
  • have retailers and wholesalers report annually on their price increase processes through their Code Arbiter’s report.

These provisions will commence on 2 January 2021.

No more retrospective changes

Parties entering into a new grocery supply agreement (GSA) from 3 October 2020, or varying, renewing or extending an existing GSA after 3 October 2020 can no longer agree to make variations to the GSA that have retrospective effect.

More of the Code applies to wholesalers

Amendments have been made to:

  • clarify that the Code applies to wholesalers’ conduct in relation to purchasing groceries from suppliers (not their conduct in relation to ‘supplying’ groceries to retailers)
  • extend the majority of the provisions in Part 3 of the Code (which includes provisions about minimum standards of behaviour in dealing with suppliers on issues such as payments, funding promotions and delisting products) to wholesalers as well as retailers
  • change the transitional provisions for new wholesalers.

Transitioning to the amended Code

It’s important to be aware of when the changes will affect you and/or be reflected in your GSA.

Good faith (Part 1A)

All retailers and wholesalers bound by the Code must comply with these provisions from 3 October 2020.

Dispute resolution (Part 5)

In most cases, retailers and wholesalers bound by the Code will have until 3 December to transition to the new Code Arbiter arrangements.

Grocery supply agreements (Part 2), Conduct generally (Part 3) and Compliance (Part 6)

GSAs made from 3 October 2020

GSAs entered into from 3 October 2020 by a retailer or wholesaler who is bound by the Code must comply with the Code.

GSAs made before 3 October 2020

GSAs that were made before 3 October 2020 must be transitioned to comply with the amended Code. The following information applies for these GSAs.

New signatories

If you are bound by the Code after 3 October 2020, you have 12 months to update your existing GSAs to comply. The relevant provisions of the Code will apply when those GSAs have been amended, or will automatically apply 12 months after you become bound.

Existing signatories

If you were a signatory to the Code before 3 October 2020 and you are a:

  • retailer — by 3 April 2021 you must offer in writing to vary your GSAs to conform with the requirements of the amended Code, and you must vary the GSA within 6 months after the supplier accepts your offer
  • wholesaler — by 3 April 2022 you must offer in writing to vary your GSAs to conform with the requirements of the amended Code, and you must vary the GSA within 6 months after the supplier accepts your offer.

Otherwise, the relevant code provisions will automatically apply to you on 3 October 2021 (for retailers) or 3 October 2022 (for wholesalers).

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