April Fools! The Mandatory Food and Grocery Code doesn’t protect suppliers at all

1 April marked the first-year anniversary of the Mandatory Food and Grocery Code of Conduct (Code).

The regulation of the relationship between the major supermarkets and suppliers is a story however that is a decade old. It started in 2015 with the predecessor to the Code – a voluntary one. 

That came about largely as a result of the “Mind the Gap” cases in the years before. The ACCC prosecuted Coles and Woolworths for engaging in unconscionable conduct in breach of consumer laws when they required suppliers to make approximately $30 million in payments when their profit targets were not hit. Coles was fined $10 million and was required to pay $12 million back to suppliers. Woolworths escaped with reputational scratches.

These cases demonstrated that the major supermarkets had significant bargaining power against suppliers. Something had to be done. A voluntary code was implemented. Its objective was: 

“to improve standards of business conduct by retailers and wholesalers (supermarkets) towards suppliers in the food and grocery industry [with] minimum obligations and standards for behaviour of supermarkets towards their suppliers, including an obligation to act in good faith.”

All of the major supermarkets signed but the voluntary code was a toothless tiger. There were no penalties or major consequences for breaches and suppliers feared complaints would be met with retribution in the form of products being delisted. The two sides continued on their not-so-merry way. But as regular reviews of the voluntary code revealed cracks along the path and stories of a successful mandatory UK regime with penalties made its way to our shores, the impetus began to convert the toothless tiger into a roaring lion.

Harming those it was designed to protect 

On 1 April 2025, the Code began – mandatory, penalties for breaches and prohibitions against retribution. It has been met with adulation and hope, but the last week has shown that the Code does little to protect suppliers even though its whole reason for existing is to do just that!

Firstly, the Code requires that all supermarkets have a grocery supply agreement (GSA) in place with suppliers that is compliant with the provisions of the Code by 1 April 2026. Supermarkets have had 12 months to get their affairs in order but reports from some suppliers are that they have only been given a few months to agree to the new terms. Hardly fair or in good faith.

Secondly, the Code states that if a supermarket does not have a Code-compliant GSA in place with a supplier by 1 April 2026, it will be in breach of the Code if it continues trading with that supplier. This provision has seen supermarkets allegedly engage in the following conduct in the week leading up to 1 April:

• asking suppliers to sign terms without amendment or else they cannot have a trading relationship; and
• telling suppliers that silence or accepting a purchase order will automatically be taken to be acceptance of the new terms.

While supermarkets may only be seeking to ensure compliance with the Code and no disruption to the supply chain, this conduct seems heavy handed and does not appear consistent with the objective of the Code. Indeed, suppliers have remarked that “it feels like we have a gun to our head”. The fundamental problem is that in circumstances where the Code is supposed to protect suppliers, it is taking away one of their key options – to remain on their existing terms and not agree to the new terms. This option is simply not available under the Code. 

Meeting in the middle? Hardly ...

The compromise? Some supermarkets are allegedly stating that any signed agreement is an “interim” agreement only for the purposes of compliance with the Code and that supermarkets will negotiate terms after 1 April 2026. I don’t want to call this out as fake news, but what will that process look like? How long will it take? Why would a supermarket obtain agreement to terms to negotiate against that position after the event? How do suppliers – the ones whom the Code is supposed to protect – feel about this? 

Unfortunately, it doesn’t end there.

The way the Code is structured is that it prohibits supermarkets from engaging in conduct against suppliers that is unfair unless that conduct is expressly set out in the GSA, the circumstances in which the supermarket may engage in that conduct and the reasons why such conduct may be reasonable.

“Mind the Gap” 

So, supermarkets could still Mind the Gap on suppliers – they just have to tell them they are going to rip them off …. before they actually rip them off. Such conduct is compliant with the Code so we can again continue on our not-so-merry way.

One executive put it like this: 

“[A supermarket] seem[s] to be aggressively “watering down” the Grocery Code protections especially around deletions. These new terms render most of the Code immaterial and there is no serious avenue to object to this, you can try to negotiate but that’s not going to get you far other than deleted so the result is we will just have to sign unless I am missing something.

My read on this is [the supermarket has] decided to aggressively undermine to the point of exiting the Grocery Code in practical terms.”

Protecting the less powerful? 

Codes of conduct are not new. They regulate cash acceptance, dairy, electricity retail, franchising, gas, horticulture, new media bargaining, oil, sugar, unit pricing, wheat port terminals and water markets. But they all seek to protect one side of the market from the more powerful other side.

But our roaring lion may still just be a toothless tiger.