If your business supplies groceries, you might be used to entering into contracts with wholesalers and retailers. But, how can you ensure that your business is protected during these arrangements? The Food and Grocery Code of Conduct (the Code) provides some protection for your business when entering into different agreements. Although the Code is voluntary, some retailers and wholesalers choose to be bound by it. This article explains how the Food and Grocery Code of Conduct might be able to protect your business.
What is the Food and Grocery Code of Conduct?
The Code provides legal standards for the relationship between a retailer or wholesaler and you, the supplier, regarding:
- grocery supply agreements;
- the termination of agreements;
- payments; and
- disputes.
The Code also provides some minimum behavioural standards and sets out the ‘good faith’ requirement between the retailer and you, the supplier.
Minimum Behavioural Standards
Except in certain circumstances, a retailer must not require you to:
- compensate for any loss (e.g. from theft) that occurs after the retailer has taken possession of the groceries;
- compensate for wastage incurred at the retailer’s (or its contractors) premises;
- pay for the retailer to stock or list your groceries,
- pay for better shelf positioning and allocation of shelf space; and
- provide payment for its activities (e.g. for the retailer to visit you or for market research).
The Code also outlines that the retailer must pay you for all grocery products that you deliver and they have accepted. They must do this in accordance with your agreement and within the set timeframe.
The Code also sets out other requirements which govern:
- promotions that require you to support through making monetary contributions;
- how a retailer can accept or reject fresh produce;
- a retailer’s communication to you in regards to its labelling requirements for groceries;
- how a retailer cannot (unless reasonable written notice or compensation is provided) require you to make material changes to supply chain procedures;
- non-discriminate shelf space allocation for your products;
- the protection of your intellectual property rights and any confidential information that you may have disclosed to a retailer;
- how a retailer cannot threaten to disrupt or terminate its agreement with you without reasonable grounds; and
- how a retailer must not delist your product as retribution for a complaint or dispute that you have raised.
Good Faith Requirement
The Code sets an obligation for the retailer to deal with you, a supplier, in good faith. Factors that may be taken into account when considering whether a retailer has acted in good faith are whether:
- either party were forced to or pressured into trading with the other;
- the parties recognised the need to be aware of trading risks and costs; and
- you, as the supplier, has acted in good faith.
The good faith obligation begins when the retailer and yourself enter into negotiations and lasts throughout the term of your agreement. Parties to the agreement cannot contract out of the good faith requirement. They also cannot attempt to limit the requirement so that it does not apply in certain circumstances.
Disputes and Complaints
You might come into a dispute with a particular retailer or have a complaint about their services. If so, you must provide them with details of the issue in writing. These details should include:
- information about the conduct that caused the complaint or dispute;
- any alleged breach of the Code; and
- the outcome that you seek.
You should also provide the retailer with any information that will assist them in investigating your concerns.
Do I Need to Sign Up to the Code?
You are not legally required to sign up to the Food and Grocery Code of Conduct. However, if you don’t sign up yourself but want to be protected under the Code, you must enter into written agreements with retailers who have signed up to the Code. The written agreement between you and the retailer or wholesaler must also include details of:
- any delivery requirements;
- the circumstances where the retailer may reject your groceries;
- any payment requirements;
- the quantity and quality requirements in regards to your groceries;
- the term of the agreement; and
- how the agreement may be terminated.
Bear in mind the Code is voluntary and is only binding to retailers that choose to sign up to it.
Key Takeaways
The Food and Grocery Code of Conduct provides some protection to your business if you supply groceries to a supermarket retailer or wholesaler. However, the Code only applies if the retailer or wholesaler has voluntarily signed up to it and you have entered into a written agreement with them. The Code provides protection through:
- minimum behaviour requirements;
- good faith requirements; and
- dispute and complaint provisions.
If you have any questions about how the Food and Grocery Code of Conduct could protect your business, contact LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.
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