Additional comments by Nationals' Senators
1.1
The committee notes concerns among stakeholders about dispute resolution
processes under the code, including their workability, timeliness and costs
(paragraphs 2.22 to 2.29). We wish to add our voice to these concerns. Given
the disparity between suppliers on the one hand, and the major supermarkets on
the other—in terms of market power, financial resources as well as experience
and expertise in dealing with disputes—the ability of the Code to operate effectively
hinges on the presence of effective, accessible and timely dispute resolution
mechanisms.
1.2
Suppliers face a number of hurdles in making and establishing a case for
a complaint under the Code. Lack of access to relevant documents from retailers
is one key issue. This is exacerbated by the presence of substantial
information asymmetries, which mean that in many cases suppliers will face uncertainty
about whether documents necessary to make and sustain their case even exist.
Costs of mediation and arbitration
1.3
The potential costs to suppliers seeking dispute resolution under the
Code is another significant barrier. In particular, concerns about costs of
mediation and arbitration were raised during discussions at the inquiry
hearing.
1.4
Former Produce and Grocery Industry Ombudsman, Mr Robert Gaussen, noted:
Arbitration is overwhelmingly more expensive in today's years
than litigation because the courts are now much quicker and more efficient in
the time they take to resolve matters. Arbitrators might get one or two matters
a year. They have very little practical experience in the area, so they are
learning from nought. And, quite frankly—and some of my close friends are
arbitrators—they spin it out, unnecessarily so, because they are being paid a
high rate. It is a bad system. ... Most of them are on daily rates. But some of
them will get $2½ thousand to $8½ thousand a day.[1]
1.5
Following these discussions, Treasury provided evidence which shed some
light on costs, stating:
Professional fees vary depending upon the complexity of the
case and the amount in dispute. They also vary between service providers.
Treasury understands, based on consultation with a private mediation provider,
that typical mediation costs are in the order of $275 per hour for each party and
that typical disputes are resolved following around 7 hours of mediation. That
is, typical mediation costs may be in the order of $1925 for each party.[2]
1.6
In making the judgement as to whether to seek mediation, a business seeking
to bring an issue forward would have to weigh up a range of factors including
the likelihood of successful mediation, the length of time, and the range of
possible costs they may face. In our view fees of around $2000 per day for each
participant are likely to represent a significant deterrent to small suppliers
seeking arbitration.
1.7
Given the great disparity in size between parties, the potential for the
party with the deeper pockets to extend negotiation periods and increase costs
would undoubtedly be a consideration to be factored in by any small supplier
seeking to have a matter resolved under the Code.
1.8
In the case of arbitration, Treasury stated that:
[T]he Institute of Arbitrators and Mediators Australia (IAMA)
Arbitration Rules also sets firm caps on arbitrator's fees that depend upon the
amount in dispute. For example, for a dispute involving an amount up to
$250,000, arbitrators' fees are capped at $25,000.[3]
1.9
The cap on arbitrators' fees of $25,000 applies for disputes ranging
from $1-$250,000. For disputes of larger values the cap increases. As the
committee notes, the arrangements for dispute resolution mean that costs are
borne by unsuccessful parties, which means that a supplier who takes a
complaint to mediation or arbitration and loses may be liable for all the costs
(2.31).
1.10
Former Produce and Grocery Industry Ombudsman Robert Gaussen noted:
Most industry dispute resolution is based on the assumption
that parties are 'equal' and able to properly resource dispute resolution
through both their preliminary research and presentation of arguments. In the
produce and grocery industry, this is seldom the case. The supplier has no or
highly limited access to paperwork, little 'evidence' to support their
assertions and no experience in presenting an argument in dispute resolution.[4]
1.11
For many suppliers struggling to stay afloat, the prospects of fees such
as those discussed above, in addition to the lost productivity (particularly
for small farms or sole operators) due to time away from their business would often
represent a material barrier to accessibility of dispute resolution under the
Code. The time costs for suppliers are a particular issue in the grocery
industry given the often substantial geographic distance between the suppliers
and retailers, which can make timely resolution of disputes difficult.
Grocery ombudsman
1.12
We believe that the appointment of an ombudsman to oversight the Code would
provide an effective and proven mechanism for low-cost, timely resolution of
disputes under the Code.
1.13
The evidence provided through the hearing process highlighted that this
approach has been clearly shown to be an effective model in improving retailer-supplier
relationships, in particular due to its capacity to 'nip in the bud' many of
the problems that would otherwise arise.
1.14
As former Produce and Grocery Industry Ombudsman Robert Gaussen stated:
An ombudsman can spend time with both sides of the dispute,
reframing the issues between them and generally resolving the differences in
private discussions. Many disputes arise and continue in the industry through a
failure of adequate communication which is compounded by geographic distance.
Dispute resolution without any prior assistance to the parties loses the
capacity to encourage parties to resolve their disputes. Disputes are more
likely to drag on generating bad feeling and ill will. There is a certain
respect for the holder of the title 'ombudsman' which is often sufficient for
parties to accept encouragement to modify their position and reach agreement thereby
avoiding unnecessary time, cost and stress. [5]
1.15
In light of the benefits an ombudsman would bring to the operation of
the Grocery Code and the grocery sector more generally, we believe there is a
strong case for the appointment of an independent ombudsman to oversight the
Grocery Code, with funding provided by the government. The ombudsman should
have formal capacity to refer businesses for further assistance to relevant
industry, Commonwealth, State or Local government bodies, including the ACCC.
Small Business and Family Enterprise Ombudsman
1.16
The government provided $8.0 million over four years to the Department
of the Treasury to transform the existing Office of the Australian Small
Business Commissioner into a Small Business and Family Enterprise Ombudsman
with additional functions and powers.[6]
1.17
The Office of the Australian Small Business Commissioner suggested that
to provide low cost alternative dispute resolution services, the Australian
Small Business and Family Enterprise Ombudsman might assume responsibility for
the resolution of disputes under the Code.
1.18
We believe this would be sensible policy that would strengthen the
operation of the Code.
1.19
Further, as part of the arbitration and mediation mechanisms under the
Code, the Code provides for either party agreeing to a named dispute resolver
or an appointment by the Institute of Arbitrators and Mediators Australia (IAMA).
However, during the course of the inquiry the committee heard that IAMA has, in
recent years suffered significant financial problems and has now merged with Leading
Edge Alternative Dispute Resolution (LEADR) under a new name.
1.20
The Government acknowledged that the code would need to be updated to
reflect this and Treasury noted:
When that new merged entity comes into existence, we would
expect that references to IAMA within the code will be appropriate to update. [7]
1.21
Given this, it is recommended that the Small Business and Family Enterprise
Ombudsman be appointed to replace IAMA under the Code.
1.22
We recognise that this will place an additional cost on the office of
the Small Business and Family Enterprise Ombudsman. However, as with ombudsman
services in other sectors, including telecommunications and financial services,
the costs of providing this service could be funded by a small levy paid by
signatories to the code.
1.23
Allowing the Australian Small Business and Family Enterprise Ombudsman to
assume responsibility for the resolution of disputes under the Code would also
result in efficiency and organisational benefits in drawing on this position
rather than creating a new position to provide ombudsman oversight to the
Grocery Code.
Recommendation
1.24
It is recommended that the Small Business and Family Enterprise
Ombudsman be appointed to replace the Institute of Arbitrators and Mediators
Australia under the Grocery Code, and the Code be amended to reflect this.
1.25
It is also recommended that, consistent with funding arrangements
in other industries, the costs of providing ombudsman services for dispute
resolution to the grocery sector be funded by a small levy paid by signatories
to the Code.
Senator Matthew Canavan Senator
Bridget McKenzie
Nationals Senator for Queensland Nationals
Senator for Victoria
Senator Barry O'Sullivan Senator
John Williams
Nationals Senator for Queensland Nationals
Senator for New South Wales
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