Developing the grocery code’s dispute resolution process
As of Jan. 1, Canada’s Grocery Code of Conduct is officially in force, anchored by a Dispute Resolution Management Process (DRMP) that serves as a formal backstop when informal discussions between retailers and suppliers fail.
Karen Proud, the first president and adjudicator of the Office of the Grocery Sector Code of Conduct (OGSCC), told Canadian Grocer this week that the DRMP was a key factor in bringing the country’s largest grocers on board.
“It was what the major grocery retailers were waiting to see before they joined the Code at the end of last year,” says Proud, referring to Costco, Empire Co., Loblaw, Metro and Walmart.
More than 150 smaller grocers, in addition to vendors of various sizes, have also signed on. Among the core principles of the Code is “Fair Dealing Across the Value Chain,” committing members to act in good faith.
Developed since March, when Proud began her role after previously serving as CEO of Fertilizer Canada and COO of the Food, Health & Consumer Products (FHCP) of Canada, the Dispute Resolution Management Process allows parties to file a formal complaint, triggering her role as adjudicator.
Cases are reviewed and mediation services are offered. If mediation is unsuccessful or declined, Proud determines whether the Code has been breached.
If a breach is found, “we publish what we call a notice of non-compliance, and the party that has breached the Code has to come back with a plan outlining how they will fix it,” she tells Canadian Grocer.
Reaching industrywide agreement on the DRMP required compromise from all parties. According to Proud, much of the debate within the working group centred on defining the limits of the Office’s authority under a voluntary code.
“Questions were raised about how far the powers of the office should go,” she said. “Some early versions sounded more like we had investigative tools or the ability to make members do things — and we simply don’t.”
She emphasizes that the DRMP is intended as a last resort. Proud says the hope is that it won’t often need to be used, and early signs suggest that may be the case.
“There’s going to be a lot of education across the board,” says Proud, noting it will take time for every buyer and salesperson to become aware of the Code. “But I’m already aware of independent grocers who were short on the supply they expected and were able to raise the Code, saying, ‘I saw the product on sale down the street,’ and the issue was corrected right away.”
Membership fees
Invoking the DRMP requires OGSCC membership. Even members of other associations, such as the FHCP, must pay dues to the OGSCC to access its resources.
Collected annually, fees are scaled based on company revenue.
Organizations with annual sales of more than $1 billion pay $35,000, while those earning between $500 million and $1 billion pay $20,000.
On the lower end, companies with $10 million to $50 million in revenue pay $500; those with $50,000 to $10 million pay $250; and companies with less than $50,000 in revenue pay $50.
A win for independents
Independent grocers, through the Canadian Federation of Independent Grocers (CFIG), were the first to call for a Canadian Code of Conduct, says Gary Sands, senior vice-president of CFIG and a member of the interim OGSCC board.
One of the main issues the CFIG pushed for during industry deliberations to create the Office was a way for its more than 6,900 members to challenge unfair supply chain practices.
Sands says that during periods of high demand or limited stock, independents often faced shortages, even with contracts in place, creating food insecurity in the rural communities they serve, while larger retailers routinely secured stock.
READ: How CFIG's Gary Sands Takes The Lead
“All an independent grocer could do was complain to their sales rep. That was the end of the line,” Sands tells Canadian Grocer. “But now, while the Code itself doesn’t fully level the playing field, the Dispute Resolution Management Process serves as a leveling instrument. It makes no distinction between whether you’re a large retailer or a small retailer, or a small producer or a large producer. It’s like the Office has a blindfold on.”
However, Sands notes that retailers cannot invoke the benefits of the Code retroactively by signing up once an issue arises, a point highlighted in an email this week to CFIG members.
“What makes Canada’s Grocery Code of Conduct different from those in the U.K. and Australia is that their codes mainly focus on large retailers, giving suppliers a platform to raise complaints against them,” adds Proud. “Ours is unique because it also lets independent grocers raise complaints about supplier behaviour, something independents fought very hard to have addressed.”
Suppliers can, of course, also complain about independents, too.
“But independents don’t usually engage in the same practices as larger grocers, given the market power those big retailers hold,” she notes. “But it’s conceivable that some of the larger independents will have to review their operations as well.”
