Supermarkets in Australia should face fines of A$10m ($6.6m) for “serious” violations of the country’s grocery code, a government-commissioned report has said.

Released today (8 April), an interim review led by former Minister for Small Businesses, Dr Craig Emerson, called for the Food and Grocery Code of Conduct to be made mandatory.

Enforcing obligatory rules, the report said, is “essential” to tackle the “heavy imbalance in market power” between Australia’s largest grocers – Woolworths, Coles, Metcash and Aldi – and their suppliers.

“The voluntary code of conduct has no penalties, leaving the competition watchdog chained up on the back porch,” Dr Emerson said.

The report called for an obligatory code to be implemented by the Australian Competition & Consumer Commission (ACCC), which would be “empowered by Parliament” to grant fines of up to A$10m.

These penalties can also equate to 10% of a grocer’s annual revenues, “or three times the benefit it gained from the breach, whichever is greatest”, the report said.

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Less serious violations of the code of “up to 600 penalty units” would be required to pay A$187,800.

Dr Emerson also recommended implementing “a new mechanism for making confidential complaints to the ACCC”, to assist suppliers who might be “fearful of retribution from supermarkets”.

Making the code compulsory would ultimately benefit consumers too, he added, providing them with “greater choice and better prices by enabling suppliers to innovate and invest in modern equipment to provide higher‑quality products at lower cost”.

The National Farmers Federation welcomed the latest proposals in the interim report. President David Jochinke said the penalties in particular “should send a strong message to retailers that the code now has teeth”.

Critics of the code have stressed that smaller suppliers affected by a code breach would be unlikely to be able to afford “a lengthy ACCC court action”.

However, Dr Emerson said that “replicating options for independent mediation and arbitration that are used in other industry codes” provides suppliers with an alternative to costly court proceedings.

Stakeholders will now have until the end of this month to submit feedback on the interim report. A final report will be issued to the government by the end of June.

The call for a mandatory grocery code follows the ACCC’s launch of a pricing probe into Australia’s supermarket sector earlier this year.

That year-long inquiry will assess “the pricing practices of the supermarkets and the relationship between wholesale, including farmgate and retail prices”, and how they have changed since the last examination in 2008.

The move came after the Australian government announced that its Greens party would be investigating what it believed was price-gouging by local retail giants Coles and Woolworths.