A report from a federal-provincial working group says the retail sector has levied an increasing number of fees on suppliers and is proposing the formation of a code of conduct as a potential solution.
Canada’s agriculture ministers are now calling on industry to lead the process.
They had formed the working group to study the issue in November, following complaints from suppliers that retailers were increasingly charging arbitrary, and costly, fees.
A summary report released July 15 said those fees are “causing tensions” in supply chain relationships, particularly between processors and retailers, as “fees have increased in their form and scale, and they have changed in the manner in which they are imposed.”
To find a regulated or legislated approach, the working group says provincial action would likely be required, but stakeholders operating on a national level contend doing so could lead to “disjointed provincial action, which could lead to inconsistent applications and loopholes if some provinces chose not to take action or do so differently.”
One potential approach being pitched is the development of a voluntary code of conduct with detailed rules to guide the commercial relationships, while also providing a dispute resolution process.
Some stakeholders have proposed the creation of this, but there are concerns it might not be widely adopted and lead to competitive distortions (only some businesses would be subject to paying compliance costs, for example).
Making the code of conduct mandatory, which also has support in some sectors, could be implemented through legislation if needed. Critics warn doing so may lead to a lack of uniformity across the country as province’s each pass separate, potentially differing, laws.
Following a July 15 meeting of Canada’s agriculture ministers, a readout from the proceedings called on industry to lead a process to “improve transparency, predictability, and respect for the principles of fair dealing.”
The ministers said the industry-led process will work alongside the working group.
Another update to agriculture ministers will likely be on the agenda at their next meeting, scheduled for December.
The dairy industry continues to be one of the loudest voices on the topic. In a release, the Dairy Processors Association of Canada (DPAC) welcomed the report’s findings.
“As a supply-managed industry, the arbitrary fees and penalties levied by large retailers create additional pressures for Canada’s dairy processors,” said Mathieu Frigon, DPAC’s president.
“We have heard from dairy processors across the country that this is a pressing issue and it is good to see that … ministers have come to the same conclusion. Now the important work toward an acceptable solution begins.”