Metcash reported $9.6 billion in food sales in the financial year to June. Aldi reported about $12 billion.

Emerson said the interim report offered the government a practical, low-cost solution and that the idea of imposing a fine equivalent to 10 per cent of turnover had been modelled on the franchising code of conduct.

“I hope this is well received,” he said. “I have sought to achieve the best of both worlds – a tough penalty regime for systemic bad behaviour but mediation and arbitration which, if agreed by the supermarkets under the constitution, would do most of the work to resolve complaints.”

In the report, Emerson says critics of the voluntary code point to the small number of disputes filed under the code as evidence of its failure.

“They nominate the fear of retribution by supermarkets as the dominant reason for so few disputes being raised by suppliers,” Emerson wrote.

That retribution could lead to unfavourable terms and conditions being imposed on suppliers, relocation of products to less popular locations in stores and even delisting of a supplier’s products.

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Treasurer Jim Chalmers said the review was an important part of the government’s competition reform agenda, which included an ACCC inquiry into supermarket prices, a boost in funding for supermarket price monitoring by Choice and a comprehensive review of competition policy settings.

“We want a fair go for families and a fair go for farmers,” Chalmers said.

“This work is all about making our supermarkets as competitive as they can be so Australians get the best prices possible.”

Under Emerson’s proposed law changes, the ACCC would help enforce the code but, rather than leaving the enforcement process to potentially years-long court cases, an independent arbitration system would be used so suppliers that brought a complaint would not go bankrupt while waiting for their case to be heard.

The ACCC would continue to be able to issue public warning notices, seek injunctions, initiate court proceedings and accept court-enforceable undertakings.

Compensation for suppliers affected by breaches of the code by one of the major supermarket chains would be capped at $5 million. Emerson also advocated for an anonymous complaints process to be established.

Eight recommendations, including the penalties making it mandatory, and changes to the code to ensure supermarket suppliers don’t fear retribution will not change between now and the final report being handed over on June 30 but three recommendations, including how to implement low-cost dispute resolution, are still to be finalised.

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