Australia: New Coles Supplier Charter: to deal in good faith with suppliers

Last Updated: 18 November 2014
Article by Leigh Krafchek and Jeremy Loeliger

Most Read Contributor in Australia, September 2016

Australian supermarket giant Coles has taken proactive measures in furtherance of its renewed commitment to deal in good faith with its suppliers, launching a new Supplier Charter setting out the kinds of terms that food and grocery suppliers can expect when dealing with one of the country's most significant buyers.

The Charter will govern Coles' relationships with farmers, food processors and other grocery suppliers and is intended to provide a voluntary and transparent regime for the quick and equitable resolution of any disputes.

What is included in the Charter?

The Charter states that Coles will commit to:

  • Good faith dealings and transparent commercial processes:
    • negotiate in good faith
    • conduct transparent and reasonable commercial processes.
  • Transparent grocery supply agreements:
    • operate within the agreed terms and respect the spirit of each grocery supply agreement and commercial relationship
    • ensure all grocery supply agreements are recorded in writing, with clear, unambiguous and concise terms-
    • make sure all grocery supply agreements are readily accessible by both parties.
  • The terms of grocery supply agreements:
    • not vary a grocery supply agreement without supplier consent, unless provided for in the grocery supply agreement
    • give reasonable notice of changes to supply arrangements.
  • Transparency around ranging and de-listing:
    • develop product ranging and shelf-allocation principles and share them on a Supplier Portal
    • apply the product ranging and shelf-allocation principles without discrimination in favour of own brand products
    • provide written notice of ranging criteria for range reviews
    • provide reasons for, and reasonable notice of, de-listing and changes to distribution to all suppliers
    • guarantee that ranging and de-listing decisions are, on request by suppliers, referred to senior managers within Coles for review.
  • Respecting the integrity of suppliers' businesses:
    • respect every supplier's intellectual property rights
    • ensure that Coles do not infringe suppliers' intellectual property rights
    • ensure that suppliers' confidential information is appropriately protected.
  • Facilitating trading relationships:
    • pay for goods delivered and accepted in accordance with the relevant grocery supply agreement on time and in full
    • resolve payment disputes promptly
    • ensure that Coles' product quality specifications and standards are clear and unambiguous
    • ensure that Coles' labelling and packaging requirements are clear and unambiguous.
  • Fast-tracking low-cost supplier dispute resolution framework:
    • provide three alternative procedures for complaint resolution, including:
      1. direct referral to the Dispute Resolution Manager
      2. internal review and referral through senior management
      3. referral to an independent arbiter
    • not disadvantage or treat adversely any supplier who relies, or seeks to rely, on the dispute resolution framework.

Dispute Resolution Framework

Coles has also announced the Coles Supplier Charter Framework to resolve disputes with its suppliers – a complementary regime that sits under the auspices of the Charter, and which includes the appointment of former Victorian Premier Jeff Kennett as an independent arbiter to oversee compliance with the Charter and resolve commercial disputes.

The dispute resolution framework will involve 3 complaints procedures for suppliers: referral to a dispute resolution manager via a confidential process; high-level internal review; and recourse to the independent arbiter.

Importantly, to level the playing field between Coles and its suppliers, use of the dispute resolution framework will be free for suppliers with expenses to be met by Coles.

As the independent arbiter, Mr. Kennett will make recommendations directly to Coles on proposals to resolve disputes, but should there continue to be disagreements, Mr. Kennett's final recommendations will be binding on Coles.

How the Charter operates in the context of the proposed Code, other laws and regulations

The Charter became operative from 6 August 2014 and it appears to mirror similar provisions to those in the proposed Food and Grocery Code of Conduct (Code) which will likely govern retailer-supplier relationships, which was agreed late last year between Coles, Woolworths and the Australian Food and Grocery Council on behalf of the food, drink and grocery manufacturing industry.

The Charter is intended to complement rather than replace the Code, which is expected to take effect by the end of 2014 or early 2015 as a prescribed voluntary code under the Competition and Consumer Act 2010, providing the Australian Competition and Consumer Commission (ACCC) with an audit and compliance role to oversee its operation.

The dispute resolution framework does not preclude any supplier from raising any complaint directly with the ACCC or utilising the procedures under the proposed Code or other applicable laws. Further, it does not preclude any party from commencing proceedings in relation to any dispute that could be, or has been, subject to dispute resolution under the Charter.

What does this mean for Coles and its suppliers?

The establishment of the Charter is an important step forward towards building strong and collaborative relationships between the supermarket giant and its current and prospective suppliers.

The Charter will help to regulate Coles' standards of business conduct and ensure greater transparency and certainty in its commercial dealings with the aspiration of minimising disputes arising from a lack of certainty in respect of the commercial terms agreed between Coles and its suppliers. Additionally, the dispute resolution framework is set up to provide an effective, independent and equitable dispute resolution process for raising and investigating complaints and resolving disputes arising between Coles and its suppliers.

To ensure the Charter delivers effective outcomes for suppliers, Coles has also announced it will commission an independent anonymous survey of suppliers on the workings of the new system, including any recommendations they might have for improvements.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Jeremy Loeliger
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