The federal, provincial and territorial ministers of agriculture set up a committee in 2020 to develop a code after repeated complaints that five large supermarket chains, which account for 80 per cent of Canadian sales, abuse their power.
For example, they once all demanded suppliers discount invoices by one per cent and made the demand retroactive. And in 2020 Loblaws and Walmart increased fees they charge suppliers.
One of the key pieces that is still missing from draft proposals is how disputes will be settled.
“The legal construct and the adjudication process are critical pillars of the overall code,” Michael Graydon, co-chair of the steering committee developing the code and chief executive of Food and Consumer Products of Canada, told the Toronto Globe and Mail. The committee is making progress on plans for a non-profit adjudicator’s office, he said, which would be industry-funded.
Enforcement will be a balancing act, because an adjudicator would need to be given the teeth to ensure compliance, while not being so punitive that companies refuse to participate in what is ultimately a voluntary process.
“This is a $100-billion industry that we’re trying to get under control,” he said.
“That we’ve got a set of provisions that we’re all comfortable with is remarkable.”
One of the issues is the demands by dominant supermarket chains that they get all of the supply they want. When supplies are short, it means suppliers will short-change weaker and smaller customers so they can retain their big buyers.
“That element of fair allocation is critically important,” Mr. Graydon said.
Another notable element of the draft is a rule establishing guardrails around those compliance fines. It encourages suppliers and retailers to agree in writing when such fines can be charged; otherwise “reasonable notice” and “substantiation” must be provided, with an opportunity to dispute the fine.
Such a rule would work against current circumstances where fines are deducted from payments, and companies haggle after the fact over whether the deductions should be reversed.
The proposed code provisions are now undergoing industry consultation, and could change based on input, Mr. Graydon said.
On Nov. 18, the Food and Beverage Canada organization pulled out of the discussions, saying there is a major flaw because he proposed code “will be insufficient to address the needs of Canada’s small and mid-sized food manufacturers,” in part because it still relies too heavily on the contracts that suppliers and retailers negotiate with each other, “without actually addressing the underlying imbalance of negotiating power.”
