Big Changes for Suppliers! Supermarkets to Face Major Fines for Unfair Practices!

The Food and Grocery Code of Conduct (Code) became mandatory for major Australian retailers, including Coles, Woolworths, Metcash, and ALDI—on April 1, 2025, applying to those with total revenue exceeding $5 billion in the previous financial year.

This significant change aims to protect small suppliers of food, beverages, household goods, and other grocery items from unfair practices such as unjust contract terms, hidden fees, and delayed payments. Non-compliance by retailers can lead to substantial penalties, including fines up to $10 million, 10% of annual turnover, or three times the benefit gained from the unfair practice.

The Code may not apply to large suppliers whose total revenue from supplying grocery products for retail sale in Australia exceeded $1 billion in the previous financial year.

Enforcement and Compliance

The Australian Competition and Consumer Commission (ACCC) is responsible for enforcing the Code. Suppliers are encouraged to report unfair practices, and large grocery businesses must appoint a code mediator to handle disputes confidentially. The ACCC conducts regular compliance checks and can investigate potential breaches. Failure to comply with the Code may result in civil penalties.

Interaction with Other Industry Codes

The Food and Grocery Code of Conduct operates alongside other mandatory codes:

• Horticulture Code of Conduct: Protects growers selling to wholesalers by ensuring fair written contracts and payment terms. For a summary of this code, please click this link Are You Compliant? Horticulture Code Breaches Are Costing Traders Thousands
• Dairy Code of Conduct: Imposes minimum standards of conduct on processors and dairy farmers.
• Franchising Code of Conduct: Sets rules for interactions between franchisors and franchisees, including disclosure requirements. For advice on the Franchising Code of Conduct please get in touch with our Franchise Lawyers.

In cases of conflict, the provisions of these specific codes take precedence over the Food and Grocery Code.

Criticisms and Challenges

Despite its mandatory status, some suppliers and industry experts question the effectiveness of the Code’s enforcement:

• Reliance on Supplier Complaints: Enforcement depends heavily on suppliers lodging complaints, which some may hesitate to do due to fear of retaliation.
• Retailer Dominance: Major supermarkets retain significant control over supplier agreements, raising concerns about potential loopholes.  However, suppliers are protected from retribution unless the large retailer can demonstrate genuine commercial reasons for actions such as removing a grocery item from their shelves.
• Compensation Issues: Suppliers may need to pursue legal action to obtain compensation, even if a retailer is found in breach of the Code.

Nonetheless, the mandatory nature of the Code represents progress in addressing the power imbalance between small suppliers and large retailers.

Recommendations for Suppliers

To navigate the new regulations effectively:

• Determine Code Applicability: Understand which agreements are covered under the Code—not just grocery supply agreements, but also related arrangements such as freight agreements, promotion agreements, supplier portal documents, purchase orders, and other associated contracts.
• Review Contracts: Ensure agreements comply with the Code and exclude unfair terms.
• Understand Rights: Familiarise yourself with protections under the Code regarding payments and contract terms.
• Report Unfair Practices: Utilise the ACCC’s mechanisms to report misconduct confidentially.

For advice on how the Food and Grocery Code affects your business or how to safeguard your interests and ensure fair treatment, please contact Georgina Parisis at gparisis@coulterlegal.com.au, Rachelle Eytan at reytan@coulterlegal.com.au or Tom White at twhite@coulterlegal.com.au from our Agribusiness and Corporate and Commercial Teams at Coulter Legal.

References

Food and Grocery Code of Conduct | ACCC  | About the food and grocery code – ACCC

Disclaimer:  The information provided above is for general informational purposes only and does not constitute legal advice. While we have made every effort to ensure the ac­curacy and reliability of the content, it is not intended to replace professional legal advice tailored to your specific circumstances. Suppliers and Retailers are encouraged to seek advice from qualified legal professionals to ensure compliance with relevant laws and regulations. We do not accept any liability for actions taken based on the information provided in this article.