“The big supermarket chains have not been treating local suppliers fairly - they have been taking advantage of their dominance and imposing unreasonable terms and conditions,” Webb said.
“It’s entirely reasonable and hardly too much to ask. Local suppliers have been stretched for a long time, and that’s stifled innovation and the development of our food supply chain.”
The new rules will initially apply to the two main supermarket chains, Woolworths, formerly Countdown, and Foodstuffs, which runs the Pak’nSave, New World and Four Square brands.
The code requires supermarkets to act in good faith with suppliers, to pay them on time, and have plain-English supply contracts. It also bans retrospective contract changes.
Breaches of the code will result in penalties with fines up to $3 million or 3 per cent of turnover, whichever is the greater. Individuals face fines of up to $200,000.
The code comes into force on September 28 and will be monitored and enforced by Grocery Commissioner Pierre van Heerden, who was appointed in July.
‘It’s essentially an abuse of power to impose such unfair terms’
Webb told Morning Report this would be the last step, at least for now, in the range of measures the Government enforced from the Commerce Commission’s recommendations last year.
So far, suppliers have had an unbalanced relationship with the dominant supermarket chains, he said.
“We’ve seen retaliatory combat when a supplier asks for a price increase, all of a sudden their products are removed from the shelves. We’ve seen some pretty unfair terms, such as having to pay for breakages that happen in the supermarket when it’s got nothing to do with the supplier.
“The supermarkets have been demanding some pretty extraordinary terms, you know, payment of 60-90 or more days, and that’s not how small businesses work and that’s the kind of thing we want to crack down on.
“I think I’ve said it’s essentially an abuse of power to impose such unfair terms. That’s why we need a code like this and we need an independent watchdog to make sure that the code is complied with.”
While the Grocery Commissioner was expected to be proactive about monitoring the big supermarket chains to be compliant with the code, suppliers should also let the commissioner know if something was going wrong, he said.
Suppliers can also take their disputes to an independent disputes authority, which can deal with disputes of up to $5 million.
“We can certainly expect that suppliers can be more innovative, can deliver better products better to supermarkets and over time I would expect this to have an impact on prices, on quality and on variety, and that’s what competition is,” Webb said.
More details on the code are available on the Ministry of Business, Innovation and Employment website.
- RNZ
