Mandatory Food and Grocery Code of Conduct is now in force

The new Food and Grocery Code of Conduct came into effect on 1 April 2025.

Importantly, the Code is now mandatory for large supermarkets and grocery wholesalers in Australia with revenues exceeding $5 billion per annum, who will face significant penalties for contraventions with the new Code.

Large grocery businesses covered by the Code include ALDI, Coles, Metcash, and Woolworths, and the Code applies to all grocery supply agreements existing as at 1 April 2025, regardless of whether the agreement was entered into before, on or after that day, unless an exemption applies.

Following feedback that the previous voluntary code was not achieving its purpose, the Federal Government commissioned an independent review, which recommended 11 changes to the then existing code – all of which were accepted. Those changes seek to increase protection for suppliers and farmers, better address bargaining power imbalances, and strengthen dispute resolution.

Key changes to the previous Code

Most of the requirements between the old and new codes have remained the same, except for some additional obligations and greater penalties under the new mandatory Code.

The Code is mandatory for large grocery businesses

All supermarket retailers and wholesalers, including those online, within Australia that meet an annual revenue threshold of $5 billion per annum are now subject to the Code. Suppliers to those retailers and wholesalers are automatically protected by the Code.

New penalties for non-compliance

The Government passed the Treasury Laws Amendment (Fairer for Families and Farmers and Other Measures) Bill 2024 in 2024, which increases the penalties faced by large supermarkets for breaches of the Code.

Breaches of the Code now attracts a maximum penalty, being the greater of:

• $10 million;

• three times the value of the benefit derived; or

• if the value of the benefit cannot be determined, 10% of the company's turnover during the previous 12 months.

Additionally, the ACCC can now issue infringement notices of up to $198,000 where there are reasonable grounds to believe that a grocery business is in breach of the Code.

Changes to dispute resolution

Alternative dispute resolution such as mediation and arbitration existed under the old code. However, further avenues for independent dispute resolution have been introduced by the Code, including:

• large grocery businesses must appoint a Code Mediator to assist with resolving disputes; and

• a Code Supervisor will be required to independently review the processes of Code Mediators on request.

Protections to address suppliers' fear of retribution

The Code will place greater emphasis on addressing suppliers' fear of retribution from retailers and wholesalers by:

• requiring senior managers of large supermarkets to oversee supplier interactions; and

• requiring incentive schemes run by large supermarkets to be consistent with the purposes of the Code.

Additional requirements under the Code

• The Government has introduced a strengthened reasonableness test that must be satisfied when agreeing to contract out of obligations under the Code, which considers the benefits, costs and risks to both supermarkets and supplier;

• To address issues relating to fresh produce, the Code will require supermarkets to include prices and exercise due care in forecasting amounts of fresh produce, although these obligations will not apply until 1 April 2026 unless the agreement is varied sooner; and

• Grocery businesses will be required to notify the ACCC when they become a large grocery business within the relevant financial year.

Other notable change

• The ACCC has launched a new online portal for suppliers and other market participants to make anonymous complaints about potential contraventions of the Code.