By Mike Cherney


SYDNEY--Australia plans to tighten regulations on supermarkets, including strengthening a code of conduct and introducing new penalties, amid concerns that big grocery chains have too much leverage over their smaller suppliers.

Under the new rules, a code of conduct that oversees the relationship between supermarkets and their suppliers, which until now had been voluntary, would be made mandatory. Hefty penalties would be instituted for the most serious breaches, and regulators would be able to issue infringement notices with enhanced fines for breaches of the code.

The code will automatically apply to Woolworths, Coles, Aldi and Metcash, and Costco is likely to exceed a revenue threshold and be required to comply with the code in the foreseeable future.

Supermarkets globally have come under increased scrutiny as post-pandemic inflation pushed up prices for basic goods, a dynamic that also led to concerns about price gouging.

The recommended changes in Australia come from Craig Emerson, a former government minister who was appointed to review the industry code. On Monday, he released 11 final recommendations from his review. In a statement, the government said it agreed with all 11 recommendations.

Emerson said he received evidence from suppliers that they feared retribution from supermarkets if they made a complaint under the previously voluntary code, and that suppliers of fresh produce are particularly vulnerable because their products are perishable.

The final report from Emerson noted that the supermarket industry in Australia is highly concentrated, with Woolworths, Coles, Aldi and Metcash, a wholesaler, making up more than 80% of the market.

"In highly concentrated markets such as Australia's food and grocery industry, relationships can be exploited by those with substantial market power," the report said. "Many food and grocery suppliers have no choice but to deal with Woolworths, Coles, Aldi and Metcash."

Maximum penalties for the most serious breaches of the code will be the highest of 10 million Australian dollars (US$6.6 million), three times the benefit gained from the breach, or where the benefit cannot be determined, 10% of turnover in the 12 months preceding the breach.

Penalties for other breaches would be as high as about A$1 million. Emerson said the penalties are the heaviest of any industry code of conduct.

Infringement notices from regulators, meanwhile, would carry penalty amounts of A$187,800.

Other government inquiries into Australia's supermarkets are ongoing, including an investigation from the competition regulator and a review from a parliamentary committee.


Write to Mike Cherney at mike.cherney@wsj.com


(END) Dow Jones Newswires

06-23-24 1944ET