Coles and Woolworths, together with the Australian Food and Grocery Council (AFGC), have agreed to a voluntary code regulating their dealings with suppliers.
According to the ABC, minister for Small Business, Bruce Billson, said the agreement will help protect suppliers when negotiating with the major supermarkets, which control approximately 80 percent of the grocery market.
"It's a clear statement between the parties about the way they will conduct themselves, the respectful nature of those commercial arrangements, the no-surprises basis of commerce rather than seeing a small supplier being told to unilaterally change the pricing or the way in which they engage with the big business," she said.
Key aspects of the Code include:
- Tough restrictions on retrospective and unilateral variations to grocery supply agreements;
- Greater transparency on the basis of shelf allocation for branded and private label products;
- Recognition of the importance of intellectual property rights and confidentiality in driving innovation and investment in new products; and
- A low cost and fast track dispute resolution mechanism.
Earlier this year, the ACCC announced it would be investigating the supermarket duopoly amid claims Coles and Woolworths bully their suppliers to force prices down.
The investigation is considering claims that the supermarkets impose penalties on suppliers that aren't part of the terms of trade, favour homebrand products, threaten to remove products from the shelves if extra payments or penalties aren't paid and fail to pay prices agreed with suppliers.
However Billson said the voluntary code should help to protect suppliers.
"I think this code is recognition that there is an opportunity to improve that relationship, that the supermarkets are very large players, and if you are a supplier to them you're very reliant on that relationship continuing even if that relationship isn't a particularly positive one."
AFGC CEO, Gary Dawson, believes the voluntary code will be just as effective as a mandatory one, and while a voluntary code won't be legislated, it will still be enforceable by the ACCC.
However, in March this year the National Farmers' Federation called for the code to be compulsory, arguing a voluntary system wouldn't go far enough in protecting farmers' interests.