By Aimee Chanthadavong

Australia’s two largest supermarket Coles and Woolworths have agreed they will provide greater certainty and clarity about their dealings with suppliers without adding complexity or cost to the consumer goods sector.

This comes after the two companies signed in agreement with the Australian Food and Grocery Council (AFGC) a voluntary industry code of conduct that will govern the retailer-supplier trading relationship.

Under the code, Woolworths and Coles will face tougher restrictions on retrospective and unilateral variations to grocery supply agreements and will be prohibited from using suppliers’ intellectual property to develop private label products. There will also be greater transparency on shelf allocation for branded and private label products.

“The Agreement on the terms of the Code is the culmination of many months of discussions between the parties and highlights constructive dialogue and goodwill across the sector. It is hoped other retailers and industry groups agree to the Code,” the AFGC said in a statement.

This agreement has been welcomed by the federal government with belief this will create balance in relationships between retailers and suppliers.

“For some time there have been concerns about the balance in the relationship between the supermarkets and suppliers and this draft code is an important, substantial and constructive step in improving those interactions,” said Small Business Minister Bruce Billson in a statement.

“The Coalition believes this first step in improving competition in the grocery sector will help boost productivity, innovation and investment.”

The draft code will then undergo a two stage regulatory impact statement and go through the cabinet process before it is implemented as part of the Competition and Consumer Act.

“The Government and the ACCC will now analyse the draft industry led code to ensure there are not unintended consequences before putting it out for public consultation which will allow other retailers and suppliers not involved in the process to provide input,” Shorten said.