In addition to imposing an obligation on retailers and wholesalers to act in good faith, and setting out the requirements in relation to grocery supply agreements, the Food and Grocery Code of Conduct also provides suppliers with additional protections.
The Code provides protections for suppliers when they make payments in support of the promotion of a product. For example, if a retailer orders a product at a promotional price, the retailer must:
- ensure that the calculation of the quantity of the order is transparent
- not over-order, and
- compensate the supplier if it sells over-ordered stock for more than the promotional price.
A retailer must provide suppliers with any fresh produce standards or quality specifications in clear, unambiguous and concise written terms.
The retailer must accept all produce delivered in accordance with these specifications, and can only reject fresh produce if the produce fails to meet a relevant standard or specification, the retailer has not already accepted the produce and the retailer rejects the produce within 24 hours after delivery.
A supplier delivers oranges to a retailer at 9:00 AM on a Monday. The oranges fail to meet a relevant standard. The retailer rejects the oranges on Thursday.
This is a breach of the Code. The retailer can only reject the oranges within 24 hours of delivery.
A retailer must communicate any labelling, packaging or preparation requirements for a grocery product in clear, unambiguous and concise written terms. A retailer must also provide a supplier with reasonable written notice of any required changes to packaging, labelling or preparation standards.
A retailer must not require a supplier to make material changes to supply chain procedures during the term of a grocery supply agreement unless it gives the supplier reasonable written notice or compensation for any costs or expenses resulting from its failure to give reasonable notice.
A retailer must publish or give suppliers its product ranging and shelf space allocation principles.
A retailer must act in accordance with these principles and apply them without discrimination (including without discrimination in favour of its own brand products).
Before conducting a range review, a retailer must provide suppliers who may be affected by the review with clear written notice of the purpose of the review and the criteria governing its decisions.
A retailer must respect suppliers’ intellectual property rights, and must not infringe a supplier’s intellectual property rights in developing its own brand products.
Further, a retailer must not require a supplier to transfer or exclusively licence any intellectual property right as a condition of supply of an equivalent own brand product.
A retailer must not use any confidential information a supplier discloses (including information relating to product development, promotions or pricing) other than for a purpose for which it was disclosed, and may only disclose it to employees or agents of the retailer who need to have that information in connection with that purpose.
A retailer must not threaten a supplier with business disruption or termination without reasonable grounds and retailers are prohibited from delisting a supplier as punishment for a complaint, concern or dispute raised by the supplier.
Where a retailer delists a product, the delisting must be in accordance with the agreement and for genuine commercial reasons.
A supplier has a 3-year grocery supply agreement with a retailer. During the term of the agreement, the retailer requests payments for wastage from the supplier. These payments are not required under the agreement. The supplier refuses to pay, so the retailer threatens to terminate the agreement.
This is a breach of the Code, as the retailer cannot threaten to terminate the agreement without reasonable grounds.