Supermarkets told supply contracts must be properly negotiated

The big supermarkets have been told the era of handshake and verbal agreements and pressure on suppliers is over.

The Grocery Commissioner Pierre van Heerden has released an open letter to Foodstuffs and Woolworths that the Grocery Supply Code was now in force and supply contracts must be properly negotiated.

"A handshake or verbal agreement is no longer good enough, and suppliers should not feel pressured into signing an agreement without the chance to negotiate the terms with a supermarket first."

He said the code would help level the playing field and end the historic power imbalance and pressure tactics between the duopoly and the thousands of small businesses supplying them.

"This new Grocery Supply Code is about formalising more comprehensive agreements - creating more transparency and certainty for suppliers about what they are signing up to, protecting them from unfair conduct, so they can better compete and succeed."

Van Heerden said the code offered protections for suppliers including prohibition on retailers in requiring certain types of payments or engaging in certain conduct, unless the supplier agreed to them under the agreement.

He said the commission had given the two big supermarket chains six months to get ready and had reviewed contracts and given feedback.

Suppliers have been encouraged to study the code, and to contact the Commission if they had concerns or were pressured by the big chains. A confidential reporting system has been for those concerned about retaliation.