Various brands of bread sit on shelves in a grocery store in Toronto in November, 2017.Doug Ives/The Canadian Press
Canada’s grocery code of conduct is a set of rules and guidelines that seek to improve fair dealings in the industry, especially between big grocers and their suppliers. These suppliers include both farmers, as well as producers of various kinds of processed foods.
Loblaw Cos. Ltd., one of two large grocers that had held out on agreeing to comply with the code of conduct, announced Thursday that they were ready to abide by the rules set out in the code if other retailers such as Walmart also came on board.
What is the grocery sector code of conduct?
In recent years, suppliers have complained about unfair “compliance fines” slapped on by large grocers if their product orders don’t arrive on time, even when the disruptions are caused by supply chain problems that are out of companies’ control.
Big grocers such as Loblaw, on the other hand, have called out suppliers for “outsized cost increases,” as big box stores face anger from consumers over food inflation.
The code of conduct sets out processes to resolve disputes in the grocery industry and addresses issues such as arbitrary fees, cost increases imposed without notice and late payments.
“Parties to the code have an obligation to negotiate with one another in good faith and conduct business in the spirit of fair and ethical dealing,” the proposed code says. “Parties to the code may not alter contracts unilaterally.”
To ensure compliance, sanctions are proposed against repeated violations, including potentially publicizing consistent bad behaviour.
Who designed the code of conduct?
In 2021, a working group of federal, provincial and territorial ministers of agriculture called for the formation of an industry group to improve transparency and fair dealing practices between suppliers and retailers in Canada.
This new steering committee consisted of small, medium, and large enterprises “including retailers, manufacturers, distributors, wholesalers, processors and producers,” according to the group’s website.
Why was the code created?
Initial government consultations around the need for a national code of conduct for grocery industry stakeholders were triggered in response to contentious fees being charged to suppliers by large grocery retailers, which have significant bargaining power because of their scale and monopoly in the Canadian market.
Subsequently, the industry committee behind the grocery code was formed, and they held consultations for more than two years, presenting their proposed code in 2023.
The federal government wanted the code to be a national industry-lead venture, instead of trying to legislate individual codes in each province and territory. Since it is not enforceable by law, compliance to the code has been voluntary, but the government has threatened to bring in legislation if Walmart and Loblaw continued to hold out.
How does the grocery code of conduct affect consumers?
The code intends to prevent big retailers from unilaterally jacking up fines and fees for suppliers, which have complained that they lack the leverage to negotiate with five grocery companies controlling roughly 80 per cent of the Canadian market.
Loblaw and Walmart have said they are concerned the new rules would swing the power balance too far, resulting in higher food prices for Canadians.
“A one-sided code that removes a retailer’s ability to hold vendors accountable to their commitments would risk higher prices,” Loblaw chair Galen Weston told MPs in an agriculture committee meeting in December, 2023.
Food groups representing suppliers and independent grocers contested Weston’s statements, saying his example of a similar grocery code in Australia supporting manufacturers’ requests for increasing prices “essentially 100 per cent of the time” was misinforming Parliament.
There’s no evidence that a grocery code of conduct would raise food prices for Canadians, said Michael Medline, the president and CEO of Sobeys’s parent company.
Are there other ways in which consumers are involved?
While the code of conduct largely deals with the supplier-retailer relationship, there is also a small technical framework for retailers to be able to charge suppliers for resolving consumer complaints.
Apart from this, the code does not directly deal with consumers or the prices they are charged by retailers. Instead, the new system hopes to bring about “fair and ethical dealings” across the industry.
With reports from Susan Krashinsky Robertson and The Canadian Press