Give bite to grocer code bid

Chairman of the Australian Competition and Consumer Commission, Rod Sims, spoke at the Australian Food and Grocery Council’s Industry Leaders Forum in Canberra recently. In his address, he said that the proposed grocery industry code of conduct that provides clear rights and legally enforceable norms of conduct would be of considerable assistance to food and grocery industry participants.

“However, many of the protections of the proposed Code are qualified, and retailers and suppliers are able to agree to ‘contract out’ of Code provisions,” Mr Sims said. “This raises an issue of whether the Code will address the problems which industry has identified if norms of conduct in the Code are able to be traded away, rather than always enforceable,” he said.

Mr Sims said that Australian suppliers had raised concerns relating to the “unfair transfer of risk from supermarkets to suppliers, and of unilateral changes to the terms of trade by supermarkets such that certainty of contract was lost”.

It has taken a long time for government regulators to recognise the imbalance in power that farmers and other businesses experience every day in the market place. The fact that the ACCC is now recognising this is a good start. The federal government must now take firm action to redress this imbalance. Ensuring that the proposed grocery Code of Conduct includes mandatory requirements would be a good start.

Mr Sims also spoke about the ACCC’s newly released half yearly report, Small Business in Focus. This report has identified that the single biggest issue that continues to get raised with the ACCC regarding small businesses and franchises is misleading advertising and false representations. Over 1,000 complaints and enquiries have been raised with the ACCC on these issues in the past year alone, including credence claims that have become an area of priority for the ACCC.

Many consumers want to buy only organic foods, or products that do not harm or have not been tested on animals, or products that do not damage the environment. These consumers are prepared to pay a premium for these kinds of products, and manufacturers and suppliers – and advertisers – are well aware of that.

Claims made about such products are called credence claims. This sort of claim may suggest a product is safer (‘non-toxic’), offers a moral or social benefit (‘free range eggs’) or a nutritional benefit (‘fat free’). The benefit may also be ‘green’ or environmental (‘100% recyclable’) or therapeutic (‘the fastest pain reliever’). A credence claim may also promote a product as being of a perceived quality (‘Swiss chocolate’ or ‘Belgian beer’).

When genuine, these claims offer businesses an opportunity to differentiate their products.

However, over the past few years, the ACCC has seen a number of examples where claims about products have overstepped the line.

The ACCC has pursued several cases in the past year where credence claims could not be substantiated, including:
Carlton and United Breweries (CUB) provided an undertaking to the ACCC in which it admitted that it was likely to have breached the Australian Consumer Law by using labelling that the ACCC was concerned represented that Byron Bay Pale Lager was brewed by a small brewer in Byron Bay, when it was in fact brewed by CUB in Warnervale.
Saskia Beer’s Barossa Farm Produce recently acknowledged that the labelling and promotion of her “The Black-Pig” smallgoods were likely to have breached the law because they represented that the pork used in The Black-Pig products was from heritage Berkshire pigs or other black pig breeds and that the pigs were free range, when this was not the case.
Basfoods recently paid penalties following the issue of three infringement notices by the ACCC, and provided an undertaking to the ACCC to address the ACCC’s concern, among other things, that Basfoods had represented that its ‘honey’ product was from Victoria, when it was from Turkey.
Last week the Federal Court handed down a $300,000 penalty against Pirovic Enterprises Pty Ltd after finding that its ‘free range’ egg claims were false or misleading.

When credence claims are misused, damage is done in a number of ways:
consumers are misled into paying more for a premium feature that doesn’t exist;
businesses which can legitimately make a credence claim unfairly lose their competitive advantage; and, perhaps most importantly,
innovation suffers when consumers and businesses lose trust in the integrity of claims.
Credence claims are important and, where a product makes a credence claim, the ‘who’, ‘what’, ‘where’ and ‘how’ must be accurate.

It is good to see that the ACCC has been active in pursuing unscrupulous businesses making false claims. Honest small businesses who are selling premium products need to be protected from dishonest competitors making false representations.
TFGA chief executive Jan Davis