Food and Grocery Code of Conduct: Changes to Good Faith for large suppliers
15 January 2025
Background
Following the 2024 review of the Food and Grocery Code of Conduct (FGCC), the new mandatory Code will come into effect on 1 April 2025. A high level overview of the significant changes was provided in this members brief. The regulations must be presented to Parliament in the next sitting period and could theoretically be revoked by a majority vote of either the House or Senate. The Secretariat will continue to monitor the situation, but we do not anticipate any issues.
Changes to Good Faith for Large Suppliers
The Code sets out to regulate standards of business conduct, ensure transparency and certainty, provide effective dispute resolution processes, and promote good faith dealings between large grocery businesses (retailers or wholesalers with a turnover greater than $5B) and their suppliers.
Large grocery businesses have an obligation to deal with suppliers lawfully and in good faith. This is an overarching obligation, established in 2015 and expanded in 2020 to include relevant examples and determinations. In this most recent review, it has been updated to include consideration of whether a large supplier (turnover ≥ $1 billion) has acted in good faith in relation to ‘that matter or a matter of that kind’ in its dealings with the large grocery business.
This means the civil penalties will not apply to the large grocery business for failing to deal in good faith with a large supplier, if that large supplier has not dealt with them in good faith. This change will effectively limit the Code’s good faith protection for large suppliers, as a large grocery business may make a claim that the large supplier has not acted in good faith.
A large supplier is defined as one whose total revenue exceeds $1 billion for the previous financial year. The revenue is determined by reference to the annual accounts of the supplier and its related body corporates, prepared in accordance with generally accepted accounting principles.
The Government explained that the exception to the good faith obligation is intended to encourage large suppliers to act in good faith when dealing with large grocery businesses in order to benefit from the good faith protections under the Code. It considers this exception is appropriate because “large grocery businesses do not have the same bargaining power over large suppliers as they do over smaller suppliers”.
The Secretariat raised concerns in relation to this inclusion, but ultimately was unsuccessful in having it altered.
AFGC next steps
The AFGC is hosting a webinar on Wednesday 5 February at 12.30pm to provide an update on the substantive changes under the new Code. This will include details on good faith, dispute resolution processes, retribution, penalties and the transition arrangements. You can register here.
Contact
For more information, please contact samantha.blake@afgc.org.au or rick.umback@afgc.org.au.
Tanya Barden
Chief Executive Officer
