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The Food and Grocery Code of Conduct will soon be mandatory.
The code covers the relationship between supermarkets and their suppliers, regulating how business occurs between the two parties, ensuring it's a fair and transparent process.
Making the code mandatory is part of a three-pronged approach to addressing issues in supermarket sector - alongside quarterly reviews of supermarket prices, and an inquiry into price gouging.
Assistant Federal Minister for Competition, Andrew Leigh, says the government is trying to make for a fairer situation for suppliers.
"We know that large firms don't just squeeze their consumers, they squeeze their suppliers too. We've heard too many stories about the suppliers not getting a fair deal. This is about a fair deal for families and a fair deal for farmers. The Albanese Government is committed to a more competitive and dynamic economy. "
All 11 recommendations from the review have been accepted, including a maximum fine of either $10 million or 10 per cent of turnover in the previous 12 months for major breaches of the code, whichever is highest.
The Code of Conduct will mandatory for all supermarkets with an annual revenue of more than $5 billion, currently covering Coles, Woolworths, ALDI, and Metcash.
But it could also include large retailers like Costco and Amazon in the future if they pass the threshold.
Former federal minister Dr Craig Emerson headed the review.
He says the Code of Conduct will be one of the strongest codes of conduct in Australia.
"It means that what was a voluntary code and an ineffective code is now going to be very effective, because it'll have the strongest penalties of any code of conduct in Australia."
Dr Emerson says supermarkets shouldn't be worried about the code if they're doing the right thing.
"If the supermarket's behave properly, they shouldn't be too worried about this because it's designed to make them behave properly. So it's not as if they will live in fear every day just treat the suppliers decently and don't put the supplies in such a difficult position where they do fear through retribution that their products will be moved from a really nice spot on the shelf down the back of the aisle or delisted altogether."
Whilst the code should improve things for suppliers, it's unclear if it'll help reduce prices for ordinary customers.
Dr Emerson is hopeful in that regard.
"It offers a better deal for the suppliers, and that means that they can compete even at lower prices. Rather than just surviving on a day to day or month to month basis."
But there's pressure for the government to do more to reduce costs for ordinary customers in the midst of a cost of living crisis.
Last week, the government's first grocery cost survey, commissioned by consumer rights organisation CHOICE, was released.
It found groceries at Woolworths and Coles were more than 30 per cent more expensive than those at ALDI.
Federal Treasurer Jim Chalmers says the report shows Australians can get a better deal if they shop around.
"What the choice data showed last week, is that people can find a better deal if they shop around. You know, one of the reasons why we're finding this price transparency is for example, people saw how much cheaper some of these groceries were at Aldi. And so we do want to make the sector as competitive as possible."
But Greens Senator Nick McKim says it proves there's not enough competition in the Australian grocery market.
"What that report showed is the so called choice between Coles and Woolworths is no choice at all. I mean, the basket of goods that was assessed showed that Coles and Woolworths have effectively identical prices. Secondly, what it showed is that even with Aldi there is still not enough competition against Coles and Woolworths to drag down the cost of food and grocery prices in Australia and stop Coles and Woolworths price gouging."
The government has consistently ruled out legislating divestiture powers, that would allow the government to break up big businesses like Coles and Woolworths if they were found to be engaging in anti-competitive behavior.
Coles and Woolworths currently control two-thirds of the supermarket sector.
The Greens will introduce a divestiture bill this week.
Mr McKim says the government needs to consider introducing the powers if it is serious about policing the supermarket industry.
"What we need is divestiture laws that will smash up the supermarket duopoly, bring in competition in the supermarket sector that will result in cheaper food and grocery prices, and we need to make price gouging illegal. Those are the things Labor could do if they wanted to take the side of Australian shoppers. "
Dr Emerson says divestiture powers won't work.
"Divestiture powers not are not a credible threat. Because if after year after year after year of deliberation in the court of the ACCC, the court decided that that was the best option. And it's very difficult to even imagine that they'd say that's the best option. And they said to Coles you've got to divest 100 stores. Anyone interested in buying 100 stores? Woolworths would say "Yeah, I wouldn't mind buying 100 stores". All you have done this shuffled the deckchairs around."
Coles, Woolworths and Aldi all provided statements to SBS responding to the code.
Woolworths said it welcomed the decision for the code to be mandatory, whilst Coles and Aldi said they were considering the final recommendations in detail.
