Canada’s proposed Grocery Code of Conduct focuses on the relationship between grocery retailers and suppliers.
The code will benefit consumers because of the stability it will provide to the relationship between retailers and suppliers, its proponents suggest. However, there is nothing overt about consumers or prices in the document. The word “consumer” only appears in the context of consumer complaints, and the word “price” only appears in the context of price-matching.
The code is a voluntary set of principles of behaviour to promote fairness and stability in the grocery industry. It has been in development since 2020, when Canada’s federal, provincial and territorial governments created a steering committee for that purpose. Two of Canada’s five major grocery retailers, Loblaw and Walmart, have refused to endorse recent iterations of the code.
The code is necessary because the power imbalance that resulted from those five retailers controlling 80 per cent of grocery sales in Canada has “led to abuse of dominance by some of the large grocers,” said Michael Graydon, co-Chair of the Grocery Industry Code of Conduct Steering Committee, as well as Chief Executive Officer of Food & Consumer Products of Canada.
It’s said the market power of Loblaw, Walmart, Sobey’s, Metro and Costco enables them to dominate suppliers, which indirectly harms smaller grocers.
In testimony to the House of Commons Agri-Committee and other published reports, suppliers and producer associations have discussed how the larger retailers have imposed deductions on sent invoices from suppliers in order to fund the retailer’s own online sales platforms as well as presenting price changes to suppliers on a ‘take-it-or-leave-it’ basis.
During the COVID-19 pandemic, suppliers of scarce products were pressured into prioritizing large retailers because of contractual penalties for failure to fulfill orders. This left customers of independent grocers to face empty shelves.
The code is based on the principles of transparency and certainty, fair dealing across the value chain, timely dispute resolution and simplicity.
Its first group of provisions, titled Fair and Ethical Dealing & No Punitive/Vexatious Acts, protects suppliers by, among other things, requiring good faith negotiations based on mutual consent and a ban on the unilateral alteration of contracts.
Commercial Agreements, the code’s second group of provisions, “strongly recommends” written agreements for anything that defines the relationship between parties, including contracts, amendments, invoices, purchase orders, bills of lading and emails. Certain critical program elements should be clearly spelled out and defined in any agreement, in particular programs for stocking, listing, positioning, promotions, unsellables and shrinkage, this section stipulates.
The largest group of provisions, Payments, includes a prohibition on demanding penalty payments without reasonable notice and substantiation. It also sets out guidelines for payments as a result of audits, price matching and consumer complaints.
In Other Items, the code sets out guidelines for changes to supply chain procedures; the tying of third-party goods or services; good faith forecasting, ordering and allocation of supply; cost changes; duties and relation to delisting or de-supplying; and the protection of confidential information and intellectual property.
The code’s final group of provisions is the Duty to Participate and Inform Staff.
The code will reduce consumer price volatility and the portion of inflation caused by unstable supplier-retailer relationships, Graydon said.
This predictability and fairness is particularly important for independent groceries in rural and remote locations, noted Gary Sands, another member of the Code steering committee and vice-president for the Canadian Federation of Independent Grocers.