Calls for Amazon, Costco to fall under code of conduct

Kat Wong |

Woolworths says the supermarket code should apply to all major retailers operating in Australia.
Woolworths says the supermarket code should apply to all major retailers operating in Australia.

Global retail behemoths Amazon and Costco should be subject to the supermarket code of conduct alongside other large Australian companies, according to grocery giant Woolworths.

An interim review into the Food and Grocery Code of Conduct released on Monday recommended the guidelines be made mandatory for supermarkets with yearly revenues exceeding $5 billion – which includes Coles, Woolworths and ALDI – and for any breaches to be met with up to $10 million in fines.

The code, which is aimed at improving standards of business behaviour in the food and grocery sector, has been proposed as a potential solution to prevent alleged price gouging and to reduce checkout prices.

While Woolworths is already a signatory to the voluntary code and supports making it compulsory, the company believes more retailers should be subject to its terms.

“The code should apply to all major retailers operating in Australia, including global retail giants such as Amazon and Costco, who have global revenues many times the size of Australian supermarkets,” a Woolworths spokesperson said.

Hardware retailer Bunnings and pharmacy Chemist Warehouse, who compete in grocery categories like household cleaning goods and personal care, should also fall under the code, Woolworths argued.

An employee is seen working in a Bunnings hardware store
Bunnings and Chemist Warehouse also compete with the major grocery chains on some products. (Dave Hunt/AAP PHOTOS)

The grocer also supported recommendations for dispute resolution for small suppliers as they could find it daunting to deal with larger retailers.

Larger suppliers, on the other hand, were already “robust price negotiators”.

Federal Nationals MP Bridget McKenzie said Woolworths had a point about which retailers were captured by the code.

“We’ve got large multinationals in the supermarket ring who aren’t captured,” she told Nine’s Today program on Tuesday.

“So I’d like to see this expanded over time.”

Review leader author Craig Emerson agreed with Senator McKenzie.

“Woolworths, I think, makes a good point, and that is the code to be extended should be expanded to cover rivals Amazon, Costco and even Chemist Warehouse,” he told Nine.

But ultimately, the Nationals and the Liberals wanted to see divestiture powers in competition laws in the future, Senator McKenzie said.

“We’ll have more to say on that in coming weeks and months,” she added.

According to Woolworths’ submission to the grocery code review, wholesale price rises from its largest 100 suppliers accounted for about 80 per cent of all cost price increases.

During price negotiations, these suppliers can withhold supply of products and are not obliged to provide justifications behind increased wholesale prices.

“In many cases, we are obliged to accept these cost price increases or face an inability to supply our customers with well-known brands,” its submission says.

An employee stocking up a fridge in a new Woolworths
Woolworths says larger suppliers are tough price negotiators who can withhold supply of products. (Dan Peled/AAP PHOTOS)

Coles, Woolworths and IGA owners Metcash all said they would consider the detail of the interim report.

An Amazon spokesperson said the company was “pleased to play a role in driving competition in the general retail sector to the benefit of all Australians”.

Treasurer Jim Chalmers says the government will strengthen the code in accordance with consultation on the review, claiming it’s “about a fair go for farmers and families”.

Despite calls from the Nationals and Greens to break up the big supermarkets through divestiture powers, Mr Emerson said a mandatory code was a more effective way of cracking down on the major supermarkets.

Consultation is open on the interim report until April 26, before the final report is released at the end of June.