Interim supermarket review calls for mandatory code, heavy fines

Major supermarkets should be subject to a mandatory code of conduct with teeth, including penalties of up to $10 million, an interim review has recommended.

Craig Emerson's first report into the Food and Grocery Code of Conduct claimed a "heavy imbalance in market power between suppliers and supermarkets" necessitated the change.

The Albanese government commissioned the review in January, facing pressure to deliver cost-of-living relief, and appointed the former Labor minister to lead it.

Dr Emerson argued the existing code was ineffective because it is voluntary and contains no penalties for breaches.

Instead he urged supermarkets with annual revenues exceeding $5 billion - which includes Coles, Woolworths, ALDI and wholesaler Metcash - be forced to sign up to a new and improved code.

These supermarkets hold a market share of more than 80 per cent in Australia.

Consultation on the review will now be open until April 26. The government will not respond to recommendations until Dr Emerson submits a final report at the end of June.

The existing code was established in 2015, following complaints about the conduct of supermarkets towards their suppliers.

It encourages supermarkets to act in good faith when dealing with suppliers, and sets out rules around general conduct, involving areas such as payment arrangements, price increases and fresh produce standards.

Stakeholders including the Australian Competition & Consumer Commission (ACCC) and the National Farmers' Federation called for the code to be mandatory, in order to promote a culture of compliance.

The review also recommended maximum penalties of up to $10 million be applied for serious breaches of the code, while less serious breaches could be charged at $187,800.

This would require Federal Parliament to amend current legislation.

The ACCC should be empowered to pursue such breaches, and should do so through the courts, the review found.

In a joint statement released on Monday, Treasurer Jim Chalmers and the Assistant Minister for Competition Andrew Leigh said the review was focused on making sure Australians got the best deal.

"We want a fair go for families and a fair go for farmers," the ministers said.

"This work is all about making our supermarkets as competitive as they can be so Australians get the best prices possible."

The Treasurer is also expected to make a significant announcement about the federal government's plans for merger reform when he delivers a major competition lecture in Sydney on Wednesday.

Supermarkets face heightened scrutiny from parliamentarians amid calls for relief from rising cost of living.

The ACCC is conducting a separate inquiry into supermarket pricing, due to report back in February 2025, while the Senate has also established a Select Committee on Supermarket Prices, which will hand down its report in May.