New Delhi

Australia plans to enforce significant fines on major supermarket chains that violate an industry code of conduct, as the federal government addresses concerns regarding unfair pricing practices affecting suppliers.

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Grocery retailers with annual revenues surpassing $3.3 billion, such as Woolworths, Coles, ALDI, and wholesaler Metcash, are now required to obey the code, which was previously voluntary.

The regulatory change comes after a report by former competition minister Craig Emerson, which found that the current code was not effective in addressing the unequal power dynamic between supermarkets and their suppliers, especially farmers.

Under the new rules, supermarkets could be fined up to 10% of their yearly revenue for breaking the code, which mainly governs their interactions with suppliers.

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For instance, Woolworths reported $32 billion in food sales in 2023, Coles reported $24.6 billion, Metcash reported $6.6 billion, and ALDI did not disclose its earnings.

"This is all about ensuring fair treatment for families and farmers," said Treasurer Jim Chalmers, Agriculture Minister Murray Watt, and Competition Minister Andrew Leigh in a joint statement. The government intends to give priority to passing legislation to make the code compulsory.

Australia's supermarket sector is highly concentrated, with Woolworths and Coles comprising two-thirds of the country's grocery sales. This announcement is part of six government inquiries into the industry.

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Representatives from Woolworths and Coles stated that they would review the report's recommendations and the government's response, and point out their commitment to supporting a sustainable grocery sector.

An ALDI spokesperson indicated the company’s support for making the code mandatory and noted that they were evaluating the final recommendations.

Similarly, a Metcash spokesperson reiterated their commitment to the code and their ongoing efforts to be the preferred partner for suppliers.

The National Farmers Federation has welcomed the proposed changes, noting that they would empower grocery suppliers to voice concerns about market power abuses that drive wholesale prices lower.

Acting CEO Charlie Thomas stated, "These changes should finally give the code the clout it needs to protect farmers," putting a spotlight on the necessity of strong deterrents to influence behaviour within the supply chain.

Additionally, the Australian Competition and Consumer Commission is conducting a separate inquiry into consumer pricing, with findings expected in February 2025.

(With inputs from Reuters)