If you are a grocery supplier wanting to supply to a supermarket, you may or may not know that there are provisions in the Food and Grocery Code of Conduct that may protect you. While the code does not apply to all supermarket retailers or wholesalers, it is binding upon those that voluntarily sign up to it. If you are deciding on (or limited to) which supermarket to supply your groceries to, you might want to consider supplying to the retailer or wholesaler that has signed up to the code. The Australian Competition and Consumer Commission (ACCC) has a record of the businesses that have chosen to be voluntarily bound by the code. This article will discuss some of the most important parts of the code and what you need to know.

1. Who is Bound By the Code?

You do not need to sign up to the code to be protected by it. However, you do need to have a written grocery supply agreement with a retailer or wholesaler that has signed up to the code to benefit from it.

Furthermore, if you want to rely on the code, your written grocery supply agreement with the particular retailer or wholesaler must include:

  • clauses that outline the delivery requirements in relation to the groceries;
  • circumstances where the retailer or wholesaler may reject your groceries;
  • clauses that outline the payment requirements in relation to the groceries;
  • the quantity and quality requirements of your groceries;
  • the duration of the agreement; and
  • how the agreement may be terminated.

2. Payments

Under the code, a retailer must not request that you pay for the loss of groceries in the retailer’s possession. For example, if someone steals groceries in the retailer’s warehouse.

If a retailer requests that you pay for waste that has occurred at the retailer’s premises, you only need to make such payments if:

  • your grocery supply agreement expressly sets out the reason for the payment and circumstances in which you need to pay;
  • these circumstances have occurred;
  • the payment is reasonable; and
  • the retailer has taken steps to ease the wastage costs.

However, under the code, a retailer must pay you for the groceries that you have delivered:

  • on a timely basis; or
  • within a reasonable time after you have provided the retailer with an invoice.

To obtain payment, you must have delivered the groceries in accordance with the grocery supply agreement. For example, groceries must be in the right quantity and meet any quality requirements set out in the grocery supply agreement between yourself and the retailer.

3. Trading in Good Faith

The code specifically requires retailers and wholesalers to deal with suppliers in good faith during the negotiation (as well as during the term) of the grocery supply agreement. Therefore, retailers and wholesalers must not request the supplier to agree to a provision in the agreement that either excludes or limits the ‘good faith’ requirement.

‘Good faith’ may include the expectation for retailers or wholesalers:

  • to act reasonably under the agreement;
  • to act honestly and cooperatively; and
  • not to act with some ulterior motive.

For example, if a retailer lied during negotiations or failed to consult with you about an important decision, a court may decide that this breaches their good faith obligations.

However, it is important to note that you (as the supplier) are also expected, under the code, to act in good faith in your dealings with the retailer or wholesaler.

4. Complaints

Before you take any other action, you should try to resolve any dispute, complaint or concern with the retailers or wholesalers. You must provide the details of your complaint or concerns in writing to the retailer or wholesaler. This includes the remedy (such as compensation) you are seeking in respect of the alleged breach of the code.

However, you should keep in mind that the ACCC can investigate any dispute, complaint or concern that arises under the code. The ACCC can seek to enforce the code if necessary.

Other Quick Tips

In addition, there are some other rights that you should be aware of. Under the code, retailers must not request that you pay for a better shelf position or space allocation of your groceries in the supermarket or shop. Retailers must also not demand that you make material changes to the supply chain procedures unless they have provided you with reasonable written notice or compensation.

You are also protected under the code from threats retailers may make with the underlying motive to disrupt or terminate their agreement with you. Therefore, you may raise a complaint with the retailer without fear that the retailer may delist your groceries in response.

Key Takeaways

If you are supplying groceries to supermarkets or shops, you should be aware of your rights under the Food and Grocery Code of Conduct. As a supplier, you:

  • do not need to sign up to the code (but the wholesaler or retailer must be);
  • usually, do not need to pay for any grocery wastage that occurs in the retailer’s possession;
  • should always act in good faith; and
  • should always try to resolve a dispute with the retailer or wholesaler before resorting to legal action.

If you have any questions on how the code protects you and your business, you can contact LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.

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