- Retailers or wholesalers who have signed up to the Food and Grocery Code of Conduct have certain obligations when they deal with suppliers.
- Suppliers and other small businesses also have protections under competition and consumer law.
What the ACCC does:
- We enforce the food and grocery code.
- We provide guidance material for industry participants about code obligations.
What the ACCC can’t do:
- We don't resolve disputes.
- We don't provide legal advice.
- We don't investigate individual supplier complaints about a retailer or wholesaler.
Good faith applies when negotiating price rises
A retailer or wholesaler must negotiate in good faith and take all reasonable steps to resolve negotiations without delay. The negotiation period starts when the supplier notifies a retailer or wholesaler of the price increase. It is expected that price increase negotiations are settled within 30 days of notification. However, complex negotiations may take longer to resolve.
The retailer or wholesaler should actively engage in negotiations with the supplier throughout the negotiation period. They should not continually limit or delay discussions until the negotiation period has almost finished.
A retailer or wholesaler cannot demand that the supplier disclose commercially sensitive information about the price increase or the related negotiations.
Retailers and wholesalers must respond to notifications within 30 days
A supplier should let a retailer or wholesaler know about a price increase in writing. Once a supplier notifies a price increase in writing, the retailer or wholesaler needs to tell the supplier within 30 days whether they:
- accept the price increase
- accept a price increase but for a different amount than proposed by the supplier
- won’t accept a price increase.
If the retailer or wholesaler doesn’t accept the price increase proposed by the supplier, the supplier can request to enter into negotiations.
The ACCC considers that a retailer or wholesaler is informed of a price increase when a supplier’s written notice of the price increase is delivered to them.
Responses to price increase notifications must be reported
Retailers and wholesalers must report annually on how they’ve responded to price increase notices from suppliers.
Delisting is when a retailer or wholesaler:
- removes a supplier’s grocery product from their range of grocery products, or
- reduces the distribution of the supplier’s product across their stores or distribution centres and this reduction has, or is likely to have, a material effect on the supplier.
There are rules about when products can be delisted
A retailer or wholesaler may only delist a supplier’s grocery product in line with the terms of the grocery supply agreement and for genuine commercial reasons.
Genuine commercial reasons might include where the supplier:
- has not met agreed quality or quantity rules
- has not met the retailer or wholesaler’s commercial sales or profitability targets under the grocery supply agreement, or
- has persistently failed to meet delivery requirements under the grocery supply agreement.
Delisting as a punishment for a complaint, concern or dispute raised by a supplier is not a genuine commercial reason.
Except in limited circumstances, retailers or wholesalers must give reasonable written notice to the supplier before they delist a product. This notice must:
- include the genuine commercial reasons for delisting the product
- inform the supplier of their right to have the decision to delist the product reviewed by the retailer’s or wholesaler’s senior buyer
- inform the supplier about their right to make a complaint to the Code Arbiter
- include the Code Arbiter’s contact details.
Suppliers may ask for information about delisting of their products
A supplier may ask for information when their products are delisted.
When the supplier makes a written request for information about the delisting or details about the reasons for a delisting, the retailer or wholesaler must promptly respond to the request in writing.
Suppliers may ask for a review of a delisting decision
A supplier can ask a retailer or wholesaler to review their decision to delist a product.
If they make this request in writing, the retailer or wholesaler must promptly review their decision and give the supplier a written notice of the outcome of their review. In their notice, they must also tell the supplier the basis for their decision.
If a supplier’s product is delisted or the listing is reduced following a range review, the retailer or wholesaler must give the supplier a reasonable opportunity to discuss the outcome of the review, including the basis for their delisting decision.
Threats to disrupt or terminate business are not allowed
A retailer or wholesaler must not threaten a supplier with business disruption, or with the termination of a grocery supply agreement, without reasonable grounds.
Example of threatening to terminate business
During the term of a supplier’s 3-year agreement with a retailer, the retailer requests payments for wastage from the supplier. However, payments for wastage are not provided for in the grocery supply agreement. The supplier refuses to pay and because of this, the retailer threatens to terminate the agreement.
This is a breach of the food and grocery code, as the retailer cannot threaten to terminate the agreement without reasonable grounds.
Suppliers must be paid within a reasonable timeframe
Under the food and grocery code, a retailer or wholesaler must pay a supplier for the grocery products delivered and accepted under the grocery supply agreement in the timeframe set out in the agreement.
Suppliers must always be paid within a reasonable time after they provide an invoice for the products.
There are rules about setting off amounts against the invoice
Generally, a retailer or wholesaler can only set off an amount against the supplier’s invoice if:
- the supplier has consented in writing, or
- where the grocery supply agreement allows them to do so, and
- the amount is reasonable.
Suppliers can’t be asked to pay for shrinkage
A grocery retailer or wholesaler can’t ask a supplier to pay for shrinkage.
Shrinkage is loss of grocery products occurring after a retailer has taken possession of the goods, such as due to theft.
There are limits on the payments suppliers can be asked to make
The code also places limits on some payments that a retailer or wholesaler might ask the supplier to make:
- payments for wastage
- funding for promotions
- payments to retailers for better positioning of groceries or an increase in allocation of shelf space
- payments as a condition of being a supplier
- payments for the retailer’s or wholesaler’s business activities – for example, a buyer’s visit to the supplier, artwork or packaging design, consumer or market research, opening or refurbishing a store, or hospitality for the retailer’s or wholesaler’s staff.
Suppliers can be made to pay for grocery waste
The supplier can’t be required by a retailer or wholesaler to make any payment to cover any wastage of groceries incurred at:
- the premises of the retailer or wholesaler
- the premises of their contractor or agent
- the premises of any other entity that is a retailer or wholesaler.
However, the supplier can agree to make payments for wastage in the grocery supply agreement if:
- the payments are reasonable, having regard to the costs incurred by the retailer or wholesaler due to the wastage
- the agreement sets out how the payment will be calculated, and
- the retailer or wholesaler takes reasonable steps to lessen those costs.
When requesting payments for wastage, the retailer must remember to consider their obligation to act in good faith.
Example of payment for wastage
A supplier enters into a grocery supply agreement that clearly sets out the circumstances in which the supplier must pay for wastage that happens at the premises of a retailer, and the basis of the payment.
Wastage occurs at the retailer’s premises, and the retailer incurs costs of $500 as a result. The retailer seeks compensation of $1,500 from the supplier under the agreement.
The retailer has breached the code. The payment is not reasonable in view of the retailer’s wastage costs.
Renegotiating wastage terms isn’t an opportunity to negotiate other things
A supplier might want to renegotiate terms in their grocery supply agreement relating to wastage. For example, a supplier might want to negotiate a lower charge because they have reduced their actual wastage. The code prohibits retailers or wholesalers from using this as an opportunity to negotiate other, unrelated terms and conditions of the grocery supply agreement.
A supplier doesn’t have to agree to fund a promotion
A retailer or wholesaler can’t require a supplier to fund part or all the costs of a promotion unless:
- the supplier has agreed to do so in the grocery supply agreement
- the funding is reasonable in all the circumstances. If there is a dispute, it is up to the retailer or wholesaler to show that the funding was reasonable.
When suppliers agree to fund promotions, there must be reasonable notice
If a supplier agrees to fund a promotion, the retailer or wholesaler may hold the promotion only after giving the supplier reasonable notice in writing.
Retailers or wholesalers who order grocery products from a supplier in connection with a funded promotion:
- must be transparent about how they calculated the order quantity
- must not over-order — and if they do, and they sell any over-ordered product for more than the promotional price, they must pay the supplier the difference between the promotional price and the supplier’s full price for that product
- cannot cancel or reduce the order by more than 10% if they are a retailer or 20% if they are a wholesaler without the supplier’s written consent. This rule does not apply if the retailer or wholesaler either gives the supplier reasonable written notice or compensates the supplier for any net resulting costs, losses or expenses they incur as a result of not receiving reasonable notice.
There are rules when supplying fresh produce
If the supplier supplies fresh produce, then the retailer or wholesaler must give the supplier any standards or quality specifications in writing and in terms that are clear, unambiguous and concise.
Fresh produce means fresh fruit or vegetables, including fruit and vegetables that have been pre-packaged, but excluding tinned fruit and vegetables.
There are rules for when fresh produce may be rejected
Retailers or wholesalers must accept all fresh produce delivered that meets the standards or specifications notified to the supplier.
They may only reject fresh produce from the supplier if:
- the supplier doesn’t meet those standards or specifications
- the produce is rejected within 24 hours after it is delivered
- the retailer or wholesaler has not already accepted the produce.
If the retailer or wholesaler rejects the fresh produce because it does not meet the relevant standards or quality specifications, they must provide the supplier with their written reasons within 48 hours.
The retailer or wholesaler must make any claim for damaged grocery products or shortfalls, or any similar claims, within a reasonable time and no later than 30 days after the groceries are delivered.
Example of rejecting fresh produce
A supplier delivers oranges to a retailer at 9:00 am on a Monday. The oranges fail to meet a relevant standard. The retailer rejects the oranges on Thursday. This is a breach of the code because the retailer did not reject the produce within 24 hours of delivery and did not provide the supplier with written reasons for rejecting the oranges within 48 hours.
Principles must be published or given to suppliers
Principles for product ranging and allocating shelf space must be published or given to suppliers by retailers and wholesalers.
Retailers and wholesalers must apply the principles fairly
Retailers and wholesalers must act according to their product ranging and shelf space allocation principles.
They must also not discriminate when applying these principles, including by not favouring their own brand products.
Notice must be given to those affected by a range review
Before starting a range review the retailer or wholesaler must give suppliers who may be affected written notice clearly stating:
- the purpose of the review
- the criteria governing its ranging decisions.
The notice must be provided to suppliers within a reasonable time.
The retailer or wholesaler must give any supplier affected by the outcome of a range review a reasonable opportunity to discuss the outcome of the review, including the basis for their delisting decision.
A retailer or wholesaler must communicate any labelling, packaging or preparation rules in writing and in terms that are clear, unambiguous and concise.
They generally must also give suppliers reasonable written notice of any changes to these rules.
A retailer or wholesaler cannot directly or indirectly require a supplier to materially change their supply chain procedures during the period of the grocery supply agreement unless they:
- give the supplier reasonable written notice of the change, or
- pay the supplier for any net costs, losses or expenses that the supplier incurs because of the failure to give reasonable notice.
A supplier’s intellectual property rights in relation to grocery products, including in branding, packaging and advertising, must be respected by the retailer or wholesaler. This includes not:
- infringing on the supplier’s intellectual property rights when developing or producing own brand products
- requiring the supplier (directly or indirectly) to transfer or exclusively license their intellectual property rights in relation to a grocery product as a condition or term of supplying an equal own brand product.
If a supplier discloses confidential information to a retailer or wholesaler in connection with the supply of grocery products, including information in relation to product development, proposed promotions or pricing, the retailer or wholesaler:
- can only use that information for the purpose for which it was disclosed
- may only disclose or make that information available or accessible to their employees or agents who need to have that information in connection with the purpose for which it was disclosed.
The retailer or wholesaler must establish and monitor systems to ensure that they meet their confidentiality obligations.
Suppliers and other small businesses have extra protections under competition and consumer law.
Retailers and wholesalers must not mislead or deceive their suppliers
It is illegal for a business to behave in a way that misleads or deceives, or is likely to mislead or deceive, consumers or other businesses. This applies even if:
- the business did not intend to mislead or deceive anyone, or
- no one has suffered any loss or damage.
Find out more about false or misleading claims and what a business can and can’t do.
Small businesses have protections from unfair contract terms
The Australian Consumer Law protects small businesses from unfair terms in standard form contracts.
The ACCC doesn’t decide if a term is unfair. Only a court or tribunal can decide.
Find out more about unfair contract terms.
Businesses must not engage in unconscionable conduct
Businesses must not engage in unconscionable conduct when dealing with other businesses or their customers, under the Australian Consumer Law. This means retailers or wholesalers must also not engage in unconscionable conduct towards their suppliers.
Find out more about unfair business practices and what a business can and can’t do.
Example of threats against suppliers
The ACCC took action against Coles Supermarkets Australia Pty Ltd for making threats of commercial consequences to certain suppliers to get them to agree to a rebate program. The Court found that the misconduct of Coles was serious, deliberate, repeated and not done in good conscience.
Anti-competitive behaviour is against the law
Certain business practices that limit or prevent competition are against the law. The following are examples of these practices.
Broadly speaking, exclusive dealing occurs when one person trading with another imposes some restrictions on the other’s freedom to choose with whom, in what, or where they deal. Exclusive dealing is against the law only when it substantially lessens competition.
Competition and consumer law bans contracts, arrangements, understandings or concerted practices that have the purpose, effect or likely effect of substantially lessening competition in a market, even if that behaviour does not meet the stricter definitions of other anti-competitive conduct such as cartels.
See Competition and anti-competitive behaviour for more information about what businesses can and can’t do.
Misuse of market power
A business with a large degree of power in a market is not allowed to engage in behaviour that has the purpose, effect or likely effect of substantially lessening competition in a market. It is not illegal to have, or to seek to get, market power by offering the best products and services.
Contact the retailer or wholesaler
If a problem occurs, your first step is to contact the retailer or wholesaler to explain the issue.
If the business doesn’t resolve the problem, there are more steps you can take.
Find out more about resolving disputes under the code.
Report a problem to the ACCC
You can also report a problem to the ACCC. We use these reports to identify issues that need investigation.