Retail Revolution: Inside Australia's Grocery Code Reform

Background

Australia's supermarket landscape is set for a fundamental reset with the introduction of a new mandatory Food and Grocery Code of Conduct (Mandatory Code). With effect from 1 April 2025, the industry will transition from the existing voluntary code to a binding regulatory framework that aims to regulate commercial interactions across the grocery supply chain.

The Mandatory Code now applies to all designated supermarket retailers and grocery wholesalers with annual Australian turnover exceeding $5 billion, including Coles, Woolworths and Aldi. This marks a welcome milestone for suppliers, shifting the historical imbalance of bargaining power between major supermarkets and suppliers across the country.

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Summary of Key Changes

1.  Mandatory, not voluntary

The new Mandatory Code shifts the existing voluntary code to a formally enforceable framework.

This transition introduces tangible consequences for adverse conduct, providing suppliers with increased legal protections in their interactions with retailers.

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2.  Penalties with teeth

The Mandatory Code now introduces substantial financial deterrents with penalties for major or systemic breaches now set at the greater of:

• $10 million;
• 3 times the value of the benefit attributable to the contravention; or
• if the Court cannot determine the value of the benefit, 10% of turnover during the previous 12 months.

Maximum penalties for other substantive breaches will be 3,200 penalty units (currently $1,001,600).

Infringement notices can also now be issued by ACCC with penalties of up to 600 penalty units (currently $187,800), where it has reasonable grounds to believe that a supermarket has violated the Mandatory Code.

In support of these measures, the Australian Government is also establishing an anonymous supplier whistleblower complaints pathway through the ACCC.

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3.  Retribution

The Mandatory Code makes it clear that retailers must not engage in retribution against suppliers.

By precisely defining the term "retribution," the Mandatory Code seeks to safeguard suppliers against punitive decisions exercised by retailers.

Actions which target suppliers and lack genuine commercial justification and appear motivated by punish mentor retaliation will be scrutinised, including:

• delisting the supplier’s product;
• requiring the supplier to make excessive contributions towards promotional or marketing costs for the supplier’s product;
• rejecting fresh produce from the supplier;
• changing the location of the supplier’s product in store or online to the supplier’s detriment;
• delaying restocking the supplier’s product in store or online;
• varying, terminating or choosing not to renew the supply agreement with the supplier for the supply of an own brand product;
• reducing the volume of stock ordered from the supplier;
• cancelling an order from the supplier; or
• varying, terminating or choosing not to renew the supply agreement with the supplier.

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4.  Allowable contrary provisions

The Mandatory Code contains a number of protective provisions which benefit suppliers (i.e., no unilateral variation or set offs or payments to cover wastage, as a condition of listing, for better shelf positioning, to meet the supermarket’s ordinary course activities or for funding promotions).

Any attempt by retailers to exclude those protective provisions now requires:

• an explicit identification of the specific clause;
• a clear declaration of intent to remove the protection; and
• a compelling, demonstrable rationale for why the deviation is reasonable.

Negotiations between retailers and suppliers that were historically a one-sided exercise will now be subject to greater transparency.

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5.  Enhanced dispute resolution

A standout improvement is the bolstered dispute resolution framework, which now includes:

• access to a Code Mediator appointed by each retailer;
• access to expedited review outcomes via the Code Mediator (within 20 business days);
• the ability to escalate complaints to an independent Code Supervisor where necessary to review the Code Mediator’s process;
• expanded alternative dispute resolution pathways available to suppliers; and
• protection from retribution when raising disputes.

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6.  Category buying incentive schemes

The Mandatory Code now directly governs how retailers design their internal incentive schemes. Category buying teams can no longer operate under reward structures that might inadvertently encourage unfair supplier treatment or retribution. Incentives must now align with principles of good faith.

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Next steps for your business

Given the new regime takes effect from 1 April 2025, we encourage suppliers to take prompt steps to future-proof their business. They can do so by:

1. reviewing all current and impending trading terms with major grocery retailers, reconciling against Mandatory Code requirements and protections;  
2. documenting all communications with major grocery retailers;
3. developing escalation protocols for potential disputes with major grocery retailers; and
4. preparing comprehensive evidence trails for commercial decisions (i.e., including commercial rationale for product development, pricing adjustments and promotional decisions).

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How we can help

As Australia's grocery landscape evolves, brands that quickly adapt to these regulatory changes will gain a competitive edge. The Mandatory Code doesn't just offer protection—it provides strategic opportunities for more robust retail partnerships.

At Ranged, the combination of our legal expertise, integrated with our deep knowledge of retail sales and account management, means we are uniquely placed to help you navigate these fundamental changes and ensure that your business is well positioned to thrive under the new regime.

If you would like to discuss the Mandatory Code and the impact it may have on your business, please don’t hesitate to get in touch with us.

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Written by Veroshan Sripragasan, Jessica Maree Gordoun & Mark Rostenburg.