2 March 2015
Transcript - #2015026, 2015

Interview with Patricia Karvelas, ABC RN Drive

SUBJECTS: Food and Grocery Code of Conduct

PATRICIA KARVELAS:

Joining me now is the Small Business Minister Bruce Billson, welcome to RN Drive.

MINISTER BILLSON:

Thank you for having me, Patricia.

PATRICIA KARVELAS:

Coles, Woolworths and Aldi are set to support the Code in principle. When will they actually sign up?

MINISTER BILLSON:

I am urging them to take decisive action to commit to being bound by the Code.

The only voluntary action that they have is the decision to opt-in or not to opt-in.

Given the encouraging reaction we have had and the constructive collaboration to date I can see no good reason why binding commitments to participate in the Code cannot be forthcoming.

And in fact Aldi have already done that today, and I am encouraged by that step by Aldi.

PATRICIA KARVELAS:

And if they don’t opt-in?

MINISTER BILLSON:

We have got the option to escalate the level of compliance burden to make it an obligation rather than a choice. At this stage we do not see the need for that, but that will depend very much on the conduct of the supermarkets themselves.

They recognised the need to put in place a Code that guarded against some egregious conduct where the market power that they offered had, in some cases, been used to great detriment of suppliers.

They know that there was a need for ‘bumper rails’ in that kind of negotiations, and that is why they have worked to develop a Code that we have strengthened and now have brought into effect.

PATRICIA KARVELAS:

Talk us through the worst abuses that you hope this Code will do away with. What do you think will actually change after they are signed up?

MINISTER BILLSON:

We have seen some examples where some of the supermarkets have felt they have not quite nailed profit targets and have then gone hunting back to the suppliers, saying ‘Well, we haven’t quite got the margin we had hoped for from you guys – how about you cough up some cash?’.

Now that sort of conduct is completely unjustified. It goes well beyond hard commercial bargaining into a space more akin to unconscionable conduct.

We have seen other examples where pressure to be involved in certain promotions or to not vary the price at which suppliers offer their goods has been matched by a threat to de-list stock that might already be part of another commercial relationship.

This has got to stop. I think the major supermarket chains know that and it is certainly what the suppliers have been calling for - so that they have solid ground, clear grocery supply agreements, a commitment to conduct themselves in good faith towards each other, an opportunity to deal with disputes quickly and not see themselves financially compromised.

PATRICIA KARVELAS:

You’re on RN Drive where my guest is Small Business Minister Bruce Billson.

The ACCC will be in charge of enforcing this Code, but the ACCC’s Chairman Rod Sims says the penalties it can impose are too small to have any real impact on supermarket giants like Coles and Woolies.

Do you agree that the penalties could be harsher, and is that still something that you’re putting in your back pocket, the opportunity to increase these penalties?

MINISTER BILLSON:

This is not the only measure at play, Patricia. As I think what Mr Sims was alluding to, we have the Harper Review, and that is a broader examination of whether the competition toolkit is adequate.

Here we have actually got for the first time a Code that sets the parameters on what fair commercial dealings looks like.

Under this Code the material that the Commission needs to instigate further inquiry and to bring to book that behaviour using the full arrange of enforcement and remedy powers that the Commission has, is made so much more simple.

They do not need to have a reasonable suspicion that something has gone on. Under this Code they can simply ask for it – that is a far faster, far more reliable way to make sure these dealings are kept between the bumper rails of fail commercial conduct.

PATRICIA KARVELAS:

Another point of contention has been the increasing numbers of ‘home labels’, those that belong to the supermarket chains themselves; they’re getting much more popular. This code doesn’t seem to address that issue, how do you…

MINISTER BILLSON:

That is not right. It does, it seeks to ensure that the suppliers’ intellectual property is protected and respected.

What that means is that times suppliers engage in discussions with the supermarket chains about new product development -what their market research is telling them - what has been of concern in the past Patricia, is the risk that that intellectual property business strategy information would be picked up by the supermarkets, taken from the supplier that advocated that change or that initiative and then put out to someone else saying ‘Hey how about you go and supply us x y and z. We have been told by another supplier it could be a winner?’.

That sort of conduct is prohibited under this Code and the supermarkets have agreed to make sure that there is not that loss of intellectual property right and protection that suppliers rightfully expect.

PATRICIA KARVELAS:

You say this is pro-competition. How is it pro-competition? Won’t ensuring suppliers get fair rates result possibly in higher prices for consumers as well?

MINISTER BILLSON:

No I don’t think so. I think what this is about, and I know the way the Grocery Council looks at it, is that where there is transparency and predictability in those commercial relationships that gives encouragement for suppliers to innovate, to invest, to engage in meaningful discussions about price and supply arrangements.

What they were faced with in the past is the risk of some unilateral or retrospective change that really pulls the rug out from underneath them.

So by getting these competitive parameters right we get a more fuller engagement between suppliers and the supermarket chains. And that means better value and better competition that will deliver benefits for consumers.

PATRICIA KARVELAS:

Bob Katter introduced legislation into parliament today over imported food labelling since this Hepatitis A outbreak.

The Government is working on its own Cabinet submission, but do you share the Prime Minister’s concerns that the legislation has the potential to be problematic for business? He said he wants to take actions but he has also talked about this business friendly version of this protection and this labelling.

How do you make everyone happy, given consumers are very concerned at the moment. Where do you stand on this?

MINISTER BILLSON:

The feedback I have got as the Minister responsible for Consumer Affairs, is there is a degree of public confusion and frustration that some of the terms and descriptors that are used in packaging and presenting food in particular might make sense to someone who has got a legal qualification, or might know the nitty gritty of the parameters and what conditions need to be met to be able to use terms like ‘Product of Australia’.

But I am looking at a label right now Patricia, I picked up some seedless grapes from a local independent grocer here in Canberra, and it says ‘Product of Australia’. Now that sounds like it is a production – why does it not simply say ‘Grown in Australia’?

This is what people are looking for: clearer, more simple, more straight forward, readily understandable information. And as the Prime Minister has said the goal is to make sure consumers have the opportunity to better understand the origin of their food, to be able to make better purchasing decisions and to guard against there being any excessive undue increase in the regulatory burden producers and manufacturers face. So that is the task.

There are no obligations currently on people to go into great detail about the Country of Original. If they make claims there are parameters about how those claims will be seen to be fair, reasonable and not misrepresenting the facts. That is helpful, but there is no burden for people to disclose that information.

We are looking at making sure that information is in the hands of consumers so they can make informed decisions and that is the work that we are well into at the moment.

PATRICIA KARVELAS:

Minister thanks for joining me on RN Drive.

MINISTER BILLSON:

Great to speak to you and best wishes to your listeners as well Patricia.