3 March 2015
Transcript - #2015027, 2015

Interview with Steve Austin, ABC 612 Brisbane

SUBJECTS: Food and Grocery Code of Conduct

STEVE AUSTIN:

Bruce Billson is the Federal Minister for Small Business, Minister good morning to you.

What does the Food and Grocery Code of Conduct actually cover?

BRUCE BILLSON:

Basically it puts an obligation on the supermarket chains to have grocery supply agreements in writing. Not too much to ask. Some clear, surefooted certainty about the commercial relationships suppliers have. There is also some minimum…

STEVE AUSTIN:

So if I am a fruit or vegie grower on the outskirts of Brisbane and one of the big major supermarket chains comes along and tries to heavy me, this will protect me from having that happen?

BRUCE BILLSON:

Well that is right.

What it basically says is we recognise the supermarket chains have a great deal of market power but that does not mean they are free from the responsibility to behave fairly.

So what this does is it says – have written grocery supply agreements, act in good faith, do not go around stalking or terrorising or threatening your suppliers.

It has in place a dispute resolution mechanism, so if a problem arises it can be resolved quickly. And then there is some prohibitions on certain behaviour, or where there is a change the supermarkets are looking for in the agreement they have entered into; a proper process for that kind of discussion.

STEVE AUSTIN:

How will we know if they are adhering to it? It's good to have a requirement to act in good faith, but this is about making profit and supermarkets are very good at doing that and they're in a very competitive environment so there's a lot of pressure on them to pressure their suppliers.

BRUCE BILLSON:

There is nothing wrong with profit, because that is what is a big incentive for people to engage in enterprise and invest and recruit people. It is how you go about securing that profit.

This is saying you need mutually respectful, good faith relationships with your suppliers. Having signed onto this Code, they will be overseen by the ACCC, there will be routine reporting.

What is also very positive is having signed onto the Code, the Commission can require the production of documents whenever it sees fit. It does not have to have reasonable cause, which is a provision under section 155 of the current laws. So that really opens it up to make sure people are behaving in an appropriate way, not going beyond hard bargaining into unconscionable conduct areas.

STEVE AUSTIN:

I'm speaking with the Federal Small Business Minister Bruce Billson.

How will we know they are adhering to it?

BRUCE BILLSON:

There is routine reporting as part of the Code Steve, and that is the best thing.

Secondly, there is no limitation on suppliers raising their concerns directly with the ACCC. What we are keen to do though is get those disputes resolved quickly and that also enables suppliers to elevate concerns up the management chain within the supermarkets themselves.

STEVE AUSTIN:

Can you give me a case that's stood out in your mind of a small grocery supplier that was being bullied and threatened, is there a case history that you can explain?

BRUCE BILLSON:

Yes there are. There has been some recent cases that have gone through the courts where there has been - let us call it a 'profit make-up effort' - late in the piece. Getting near the end of reporting period and certain areas of certain supermarkets feeling they are not quite meeting their profit targets and then going back to the suppliers saying – 'Look we haven't quite made the margins we had hoped for, it is in your interest to cough up some extra cash'.

Now that is just ridiculous. We have seen other examples where there may have been a difference of opinion about a particular payment for one month, and then the supermarket chains have simply deducted what they think is fair enough off a payment where there is no dispute.

So it is really that kind of conduct that is quite unhealthy.

Other examples where unless certain action is taken by suppliers, a threat to look at withdrawing items from shelf spaces and the like, that has got to stop.

STEVE AUSTIN:

Now, products or items often are asked to buy shelf space if they want to get their products on the shelf. Is that still lawful or allowable?

BRUCE BILLSON:

It is generally not, except if that is what the supplier agrees to without having any intimidating brought to bear on them.

What does that mean? Well, in the real world Steve if you and I came up with a 'Steve and Billy's World Class Jam' and we need to get it in front of people we may well, as a matter of course, decide that we want to have a prominent shelf placement and engage in a joint marketing and promotion strategy. That is fine.

What this agreement says is have those arrangements up front. Have them clear and agreed to and understood. Do not try them on as a fit-up afterwards. Do not go about some after the event demand of some change in terms and conditions.

It allows room for regular commercial negotiation, but it puts 'bumper rails' up so it does not stray into areas that are harmful to the suppliers and then indirectly harmful to consumers.

STEVE AUSTIN:

Speaking with the Federal Minister for Small Business Bruce Billson.

Bruce Billson, it is Tuesday 3 March. Up to today how many supermarket chains have actually signed?

BRUCE BILLSON:

At this stage we have got a statement from one – Aldi – credit to Aldi, they have got very good relationships with the suppliers.

Coles and Woolworths have both said they are keen to sign; they have been intimately involved in the drafting and fine turning of this Code.

STEVE AUSTIN:

So they have been keen for a long time now.

BRUCE BILLSON:

They have and I am keen…

STEVE AUSTIN:

A very long time.

BRUCE BILLSON:

Well I am keeping them keen, and keeping them keen to the point that if we do not get the level of participation that we need, I will need to revisit the mechanism itself.

STEVE AUSTIN:

Have you got a deadline date where you ring up Coles and Woolies and say 'Guys, you have been keen for years now. When are you going to do it?'

BRUCE BILLSON:

They have assured me they are supportive of the Code. They are waiting to ensure that the Senate does not mess with it. You would know and your listeners would know we have had a few examples Steve where the Senate has injected itself into this area, but all sides of politics have been trying to achieve something like this.

We have done it, we have delivered, they are on board, they are wanting to make sure there is no 11th hour change by the Senators and then they have advised me they will sign on.

So I am encouraged by that.

I am a little bit disappointed with Metcash, to be frank with you.

STEVE AUSTIN:

Which is the company that runs IGA supermarkets?

BRUCE BILLSON:

Yeah, yeah.

STEVE AUSTIN:

Why?

BRUCE BILLSON:

They have a different business model and I am sure your listeners would realise they operate as a buying group. They have some interest at the retail customer facing end, a slightly different model.

I took on board their concerns and created a bespoke, a specific purpose regime in the Code for Metcash; taking on board their particular concerns about transaction costs, the number of agreements that they have.

They were all very positive about that and now they are telling me they are going to abide by it but not actually sign up to it. Which is a bit wimpy and quite disappointing and I am choosing my words carefully because I cannot begin to tell you how unhappy I am about that decision.

STEVE AUSTIN:

So you're going to do anything about it?

BRUCE BILLSON:

I will continue having words to them.

It amounts to a 'Milli Vanilli' kind of commitment. We are not looking for lip sync, we are wanting people to be in and involved. They have said they will turn their mind to that after road testing its introduction. Well, they can road test it by signing on in my view and I will continue those discussions.

STEVE AUSTIN:

Dairy farmers have said it was a positive first step but obviously they are expecting more steps after this?

BRUCE BILLSON:

Everyone has wanted action in this space and the good thing is we have delivered. The Food and Grocery Council have characterised it as 'historic', it is a real game changer, but we need to make sure that it works.

That is why there is a three year review there; to make sure that it is effective and that no one plays funny buggers.

STEVE AUSTIN:

Bruce Billson thanks for your time.

BRUCE BILLSON:

Good to chat Steve, best wishes to you and your listeners.