The NFF Horticulture Council is concerned the draft of the updated Food and Grocery Code of Conduct will not make a practical difference to the way fresh produce suppliers are treated by supermarkets, and will actually hurt small growers and suppliers across the industry.
In June, the Federal Government released the written report of the independent review of the Code of Conduct, conducted by the Hon Dr Craig Emerson. All of the recommendations were accepted meaning the mandatory Code will replace the voluntary code on April 1, 2025.
But speaking to FreshPlaza, Horticulture Council Chair Jolyon Burnett says there is a power imbalance when it comes to small fruit and vegetable growers and the multi-billion dollar retail corporations.
"Fresh produce producers are putting a lot of time into writing submissions, attending consultation meetings and providing information," he said. "I think that the input has really helped the inquiries understand what is a very complex issue, the way supermarkets deal with fresh produce suppliers. We all expected the government and their agencies to take our concerns and claims seriously - and ultimately take some action. We don't believe that there is enough clarity, detail and understanding to make a difference. After all this time it's disappointing. We believed Dr Emerson when he said he wanted to make a difference to small horticultural and other grocery suppliers. We believed he was serious about tightening the Code up, but from what we can see he's fallen short."
He added that fresh produce suppliers, both through the Council and on their own behalf, have engaged in good faith with reviews around fresh produce being supplied to the retail sector: including the Queensland Government's review, the Federal Senate Inquiry, the Emerson review of the Code and the ACCC inquiry that is still ongoing.
While the draft has plenty of work that is needed, Mr Burnett says there are some positives that he does not want to be lost in the criticism, including the fact that Dr Emerson has made it mandatory rather than voluntary, where retailers can opt in or out by individual companies. Another positive out of the draft was the increase in penalties for any breaches of the code potentially up to $50million from $5million, which the Horticulture Council said was previously seen as "just a business cost".
"Although we are sceptical that any small fresh produce supplier would be in a position to take either of the two major supermarkets to court," Mr Burnett said. "The ACCC themselves, to date, has not even had the resources to take them on. It's a shot across the bows, but it won't make a practical difference. This is a negotiation that takes place between small family farms and multi-billion dollar corporations, so while you could look at it and say it looks comprehensive, it also has to be tight and specific to give the growers the protection they need."
Another recommendation Dr Emerson has made is for a more independent Ombudsman to look at disputes around the Code, which is welcomed, as opposed to the supermarkets hiring their own arbiters like in the past. Mr Burnett says that growers did not have a great deal of confidence that they were truly independent. The ambiguity, vagueness and subjectivity around some of the language is also a worry for the Horticulture Council.
While there are standards that exist in each fresh produce industry body, the supermarkets can impose their own standard from product to product, giving the retail giants the option to reject produce saying it is not up to specification giving farmers limited time to sell the perishable item which is most often for a lower cost. Other concerns include the lack of transparency over forecasting how much each item of produce they may require, but if they claim trading does not live up to expectations they can change purchasing at late notice after the produce is grown.
"Our growers tell us that the fear of retribution remains," he said. "The overarching issue we have is that no one has taken the trouble to actually understand how these transactions happen between a corporation worth over a billion dollars and family farms. The lack of documentation that is there along with the way that these transactions take place. So, while Emerson has tried to address this there are terms stating supermarkets 'must act reasonably' when setting standards and specifications. Telling a supermarket they must act reasonably or take due care, a person in first-year law can dance their way around terms like that, let alone the highly qualified and experienced legal teams that the supermarkets employ. We just can't see a Code that has the right terminology in it."
Mr Burnett also has a problem with the transparency surrounding rebates that supermarkets require for things such as wastage, marketing or getting paid on time.
"The Code has tried to address this and said the retailers shouldn't be able to make deductions or charge rebates, but then they put in exceptions such as 'except where it may affect the supermarkets trading' or something like that," he said. "You have to keep bearing in mind when reading the code, on one hand, there are mostly family farms and on the other, there are multi-billion dollar corporations that have teams of negotiators, buyers and lawyers. You know who is going to win when it comes down to defining what a code means. We are calling for clarity for specificity of language."
The Horticulture Council is calling for a postponement of this draft Code being tabled in parliament until the ACCC inquiry has been finished and further engagement with industry, then perhaps these issues can be amended to reflect a fairer balance.
"To be fair to Dr Emerson, we think he's doing his best to address these things, but despite our warnings, he and his team have never sat down and put in the time with organisations like ours to fully understand how this works and where the wriggle room and loopholes will hurt producers. We certainly hope they can engage with us and go through the details of why it's needed, but we've had no response so far. The ACCC inquiry is still underway so we want to see what the recommendations, if any, may support what we are saying or clear up our concerns. Let's use this pause to sit down with fresh produce suppliers and hear where the Code can be clearer, stronger and more effective."
For more information about the Government's response to the Food and Grocery Code of Conduct, click here - or contact the Treasury Department, by phone on +61 2 6263 2111
Jolyon Burnett
NFF Horticulture Council
Phone: +61 2 6269 5666
[email protected]
www.nff.org.au/nff-horticulture-council