Coles & Woolworths Could Face Fines Of Up To $4 Billion If A Huge New Rule Change Goes Through

The Australian Competition and Consumer Commission (ACCC) has recommended that the Federal Government make the voluntary Grocery Industry Code of Conduct (GICC) binding, which could result in significant penalties for the country's two largest supermarket chains, Coles and Woolworths, if they breach the rules. The GICC is a set of guidelines that aims to promote fair business dealings between supermarkets and their suppliers, including provisions related to pricing, payment terms, and product listing.

The report, commissioned by the government in response to concerns about the market power of Coles and Woolworths, was released on Monday, 25th October 2021, by former Labor politician and competition lawyer, Rod Sims, who led the review. The report found that making the code mandatory would provide greater certainty for suppliers, improve transparency, and help prevent anti-competitive conduct in the sector.

The potential fines for non-compliance with the mandatory code are significant, with the ACCC proposing penalties of up to 10% of annual turnover for breaches, which could amount to billions of dollars for the two major supermarket chains. For instance, Coles reported a revenue of around AUD 39 billion (USD 27.5 billion) in the 2020 financial year, while Woolworths reported revenue of around AUD 36 billion (USD 25.6 billion) during the same period.

However, the report did not suggest breaking up the duopoly, as previously speculated, but instead focused on strengthening the regulatory framework to address the market power of the two dominant players in the Australian grocery market. The report also recommended the establishment of an independent body to enforce the code, as well as the introduction of a dispute resolution process to help resolve disputes between supermarkets and their suppliers more efficiently.

The government is yet to announce its decision on whether to make the code mandatory, but the recommendation has been welcomed by various stakeholders, including the Australian Food and Grocery Council, which represents the interests of the food and grocery manufacturing industry. The council's CEO, Tanya Barden, stated that the report's findings "provide a clear pathway to a more competitive, fairer, and more transparent grocery sector."

In conclusion, the potential mandatory implementation of the Grocery Industry Code of Conduct could result in substantial fines for Coles and Woolworths if they breach the rules, as part of an effort to address the market power of the two major players in the Australian grocery sector and promote fair business dealings between supermarkets and their suppliers. The government is yet to make a decision on the matter, but the recommendation has been welcomed by various stakeholders as a step towards a more competitive, fairer, and more transparent grocery sector.