The National Farmers’ Federation is ‘cautiously optimistic’ about the code, but says it will only work if all the major retailers sign on

This article is more than 5 years old

This article is more than 5 years old

After years of tension between farmers and supermarkets over produce supply contracts, the federal government has announced a voluntary code to govern the relationship.

The code, which formalises interactions between supermarkets, wholesalers and suppliers, will come into effect on Tuesday, the small business minister, Bruce Billson, announced on Monday.

Farmers and other suppliers have long complained about being squeezed by supermarket contracts, particularly by the imposition of marketing fees or levies.

The food and grocery code of conduct will ensure that supply agreements are made in writing, and that minimum standards of behaviour are adhered to. It will include a new reasonableness test for proposals to vary supply chain agreements, and formalise a process for resolving disputes.

Agreements that have broken down will be taken to the Australian Competition and Consumer Commission (ACCC).

Billson said the code was a “very substantial step forward” and indicated it could make groceries cheaper by increasing competition.

“This code is about looking after the interests of consumers. Because we know if suppliers are uncertain or anxious about their supply arrangements, that will impede their preparedness to invest, to innovate and to provide good value to Australian consumers,” Billson told reporters on Monday.

Supermarket chains were party to negotiations to establish the code, and Billson said there is “no good reason whatsoever” that they will not sign on to it.

He has not ruled out forcing their participation if the voluntary code fails, but insists that is unlikely.

“I’m now calling on those supermarket chains to follow through on those words,” he said.

Wholesaler Metcash will not sign up to the code until after a 12-month trial.

“It is important for us to understand the extent to which the code would impact Metcash, our broad supplier base, particularly the many small suppliers we support, as well as the independent retailers we supply,” chief executive Ian Morrice said. “The trial will enable Metcash to understand how the code impacts our complex business model at every level.”

The National Farmers’ Federation is “cautiously optimistic” about the code, but said it would only work if all the major retailers sign on.

It withdrew from the negotiations because its members wanted the code to be mandatory.

The federation’s chief executive, Simon Talbot, told Guardian Australia the government would review the voluntary nature of the code after three years to see if it is working, adding that was unacceptable to farmers. “We can’t wait three years,” he said.

The code, along with the expansion of ACCC scrutiny and the opening up of export markets through free trade agreements, had put farmers and suppliers in a stronger position of power, Talbot said.

Head of the Australian Food and Grocery council, Gary Dawson, welcomed the voluntary nature of the code, calling it “light-touch regulation”.

“We think it’s a good balance,” Dawson said. “It is light-touch regulation consistent with the government’s view, consistent with the industry’s view, and that’s one of the real strengths of the code.

“One of the strengths of the collaborative approach that’s been taken here is that the major supermarket chains have been involved in this right from the start. It was their willingness to come to the table that made this possible, really,” Dawson said.