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Grocery code of conduct: Canada could learn lessons from elsewhere

Advocates say codes of conduct have helped stabilize prices in the UK and Australia
4/22/2024
aldi london england
Outside an Aldi store in London, England.

The implementation of a code of conduct for grocery stores appears to have reached an impasse since two of the country's main chains, claiming that it would lead to higher prices, refused to adhere to it.

This code aims to establish rules for fair negotiations between chains and suppliers, which could create a fair environment for all.

Politicians and advocates of the concept argue that codes of conduct have helped stabilize prices in the United Kingdom and Australia.

“However, such a code has been put in place abroad... There is one in Australia and one in the United Kingdom. In both cases, it led to a reduction in prices,” noted Bloc MP Yves Perron, during a meeting of the Standing Committee on Agriculture and Agri-Food of the House of Commons, on December 7.

READ: Grocery code of conduct won't drive prices higher, Sobeys chief executive says

Even if the code proposed in Canada differs from those existing in these two countries, there are lessons to be learned from it.

In the UK, the code has been mandatory for the 14 largest chains since 2010. “It was designed to prevent retailers from transferring excessive risks and unexpected costs to suppliers,” explains Mark White, the current UK adjudicator.

Previously, this code existed, but it was on a voluntary basis. This system was, however, ineffective, judges a former arbitrator, Christine Tacon. The position of arbitrator was created in 2013. Its arsenal is quite dissuasive since it can impose fines of up to 1% of their income.

Retail prices are not mentioned in the code. However, Mark White recently published "golden rules" for retailers who must respond to suppliers who demand higher prices.

In Australia, the creation of a code of conduct in 2015 was prompted by complaints from suppliers about the way they were treated by grocery stores, says Tanya Barden, CEO of the Australian Food and Grocery Council.

The code, overseen by an independent adjudicator, is however on a voluntary basis. But as soon as we adhere to it, we must legally comply with it. All the major channels have signed.

“The cornerstone of the Australian code is the requirement for retailers to trade in good faith,” Barden says.

But have these codes been effective?

It is difficult to draw a conclusion. A quick look at food price inflation seems to suggest that the codes had a stabilizing effect after their implementation, but it is difficult to attribute credit to any single factor.

READ: House committee tells Loblaw and Walmart to sign grocery code or risk legislation

In the United Kingdom, inflation remained below three percent from 2014 to 2022. In Australia, it was below 1% until 2019 before climbing.

However, surveys carried out among suppliers show that they are treated better by retailers.

The code proposed in Canada shares certain aspects with the British and Australian models except on one important point: it also wants to integrate suppliers as well as retailers. This objective is more complicated to achieve, judges Tacon.

And at the moment, we do not know whether it will be mandatory or voluntary.

If all important players do not adhere to it, the code will not achieve its objectives, argue its defendants. In February, the Standing Committee on Agriculture and Agri-Food warned Loblaw and Walmart that if they did not adhere, it would recommend that the federal and provincial governments enshrine it into law.

In Australia, the authorities are considering making it compulsory.

Barden says Australia's code has been effective, but has room for improvement. “It is not a panacea against market concentration,” she warns. The code aims to increase trust, transparency and improve negotiations between retailers and suppliers. These are different issues.”

Michael Graydon, chairman of the code's interim board of directors and CEO of Food, Health and Consumer Products of Canada, recalls that the Canadian code was created to ensure economic stability for suppliers and consumers. producers, not for affordability purposes.

Despite this, he believes it could help stabilize prices. He also mentions that countries that have implemented such a system have seen a drop in food price inflation.

“This should not be the silver bullet to achieving affordability.”

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