Support divided on legislated code of conduct

The push for a legislated code of conduct in the grocery sector is being met with some pushback.

On March 25, Empire Company, which owns Sobeys, Safeway and FreshCo., and Food, Health & Consumer Products of Canada (FHCP) released their proposal for a Grocery Supply Code of Practice for Canada.

The draft code aims to fix poor relations between grocers and suppliers, and end what FHCP calls “unfair practices,” such as arbitrary fees, cost increases imposed without notice, and late payments. The proposed code was formally submitted to a working group that was formed last November by the federal, provincial and territorial (FPT) Ministers of Agriculture and Agri-Food to address issues in the grocery industry.

Both FHCP and Empire support the code of practice being legislated and regulated in Canada. However, not everyone wants the government in the boardrooms of the grocery industry.

Walmart Canada, which was not involved in the FHCP/Empire proposal, said it supports many of the principles and language outlined in the proposal, but doesn't believe a legislative policy is needed.

“Walmart Canada has a great working relationship with our suppliers and we continue working with them to help nurture and support their businesses,” said Adam Grachnik, director of corporate affairs at Walmart Canada, in an email to Canadian Grocer. “We already work collaboratively and transparently with all suppliers – big and small, domestic and international. That’s why we disagree that a complex, legislated, bureaucratic Code is necessary.”

“These are routine confidential business discussions and negotiations between retailers and suppliers,” he continued. “These discussions and negotiations happen every day and they reflect the dynamic competitiveness of the market.”

The Canadian Federation of Independent Grocers (CFIG) has long supported a code of conduct—albeit a voluntary one. Senior vice-president Gary Sands said his organization would like to see a code modelled after Canada’s Code of Conduct for the Credit and Debit Card Industry. Sands, who was involved in the development of that code, said industry associations, credit card companies, banks, payment processors all came together to develop a voluntary code. “I can tell you, the code has worked great for the 10 or so years it’s been in existence,” he said.

One reason a voluntary code is appealing is when changes are needed, politicians don’t have to get involved. “With the payments code, the ones who change it are the industry, and we’ve made many changes to the code,” said Sands. “There is a group that deals with the code on an ongoing basis, it has representatives from all the sectors, and that’s how changes are made.”

The FHCP/Empire proposal was modelled after the UK Grocers Supply Code of Practice, which was introduced in 2010. In 2013, the Grocers Code Adjudicator Act came into effect to enforce the code of practice.

READ: No code of conduct in Canada? Pity

In an interview with Canadian Grocer on March 25, FHCP president Michael Graydon said in the first few years of the U.K. Grocers Supply Code of Practice, behaviours didn’t change. “The minute it moved into an [enforced> code, everybody snapped to attention and started to follow it impeccably and the successes started coming,” he said.

“I think it takes a regulated framework to ensure that there is consistent compliance across the board and we’re not spending time negotiating whether you’re compliant or not compliant in a self-regulated format,” said Graydon.

Sands said CFIG and other industry associations are making their own submissions to the FPT working group. CFIG has been calling for a code of conduct for several years, and was disappointed that the Empire/FHCP proposal doesn’t mention independent grocers. “That’s a big omission in our view, especially because a lot of the practices that go on in the industry disproportionately put the independent grocer at a competitive disadvantage and it was written through the lens of a big player,” he said.

For example, “There’s not an independent grocer in Canada that can negotiate any supply agreement on the same level as what the Loblaws and Walmarts of the world can get,” said Sands. “It’s not even close.”

In addition, the draft code requires retailers to designate “code of compliance officers” to oversee code compliance. “So, a single-store operator in Canada is supposed to hire a grocery code compliance officer?” said Sands. “Are you kidding?”

It appears that’s not just an issue for the independents. Walmart Canada’s Grachnik also called out the proposal’s inclusion of compliance officers, as well as the recommendation for a government adjudication system to manage any complaints of unfair practices under the code.

“Governments, retailers, suppliers and customers simply do not need a set of new complicated rules, ‘compliance officers’ and 10 different sets of provincial adjudication systems interfering with an already competitive marketplace,” said Grachnik.

Loblaw did not return Canadian Grocer’s request for comment. Metro said the company won’t be commenting at the moment.