Canada grocery code sets rules on contracts, fees and dispute resolution

Canada’s proposed Grocery Store Code of Conduct, which became fully operational Jan. 1, lays out new standards aimed at curbing unfair practices between retailers and suppliers.

The voluntary, industry-led code is designed to promote transparency, commercial certainty and fair dealing across the grocery supply chain, while providing a formal mechanism to resolve disputes. It applies to all grocery retailers and suppliers operating in Canada, covering most food and household products sold in supermarkets.

Key provisions prohibit retailers or suppliers from unilaterally changing contracts and from taking punitive or retaliatory actions when a party exercises its rights under the code. Agreements are encouraged to be set out in writing and must clearly define terms such as payment timelines, promotional programs, performance metrics and procedures for unsellable goods and recalls.

The code also places limits on fees and deductions. Retailers must provide clear justification for charges related to promotions, shrinkage or non-compliance and suppliers must be given the opportunity to dispute them before money is deducted. Retroactive charges are restricted unless explicitly agreed to.

Forecasting and ordering are to be conducted in good faith, with parties expected to collaborate on demand planning and work together to mitigate material variances. Reasonable notice is required for product delisting or supply discontinuation.

Disputes must first be addressed internally before being escalated to a formal dispute resolution management process established under the code.