Bunnings baulks at firmer rules around plant suppliers

There are calls to cast the net wider and include other retail giants.

There are calls for Bunnings to comply with the Food and Grocery Code of Conduct. (Dave Hunt/AAP PHOTOS)

Bunnings has been accused of abusing its market power and forcing suppliers of green life products, such as plants and flowers, into unfair contracts.

Laura Gaspert, an executive at Bunnings, told a parliamentary inquiry she was saddened to hear about the experiences of some suppliers.

But she maintained the supermarket rules were not relevant to the hardware chain.

"We don't consider the food and grocery code fit for purpose with our business model," she told the inquiry on Monday.

"We consider our business very different from the supermarket business.

"If the code was extended to green life (products), we would participate in those conversations to understand if there were any implications that are relevant."

Bunnings category manager Belinda Raskers said it was in the best interest of the company to maintain its relationships with producers and she was shocked at previous evidence from plant suppliers.

"We rely purely on our suppliers over supply, and having not really strong relationships with our suppliers is of no commercial benefit for us," she said.

"We have to have really long-term, viable supplier relations here."

Woolworths and Coles are under pressure over their treatment of customers and suppliers. (Joel Carrett/AAP PHOTOS)

There are growing calls to make mandatory the voluntary code of conduct.

Australian Food and Grocery Council chief executive Tanya Barden said producers and suppliers often had to deal with disparities in the supermarket industry, leaving an unequal playing field.

"The concentrated nature of food and grocery retail markets in Australia has a significant imbalance in negotiating power between the major supermarkets and suppliers," she said.

"Whereas the supplier may derive half of its revenue from one of the major supermarkets, its business will likely represent a tiny fraction of the supermarket's total revenue."

Ms Barden said major supermarkets had become "gatekeepers" for both the retail price and wholesale price offered to suppliers.

She said supermarket prices had been kept artificially low for a long period of time, before increasing costs at the check out.

"That's not healthy for suppliers, it's not healthy for consumers and that's a pattern we need to avoid in the future," she said.

Allan Fels says grocery stores who breach competition laws should be forced to divest. (Mick Tsikas/AAP PHOTOS)

Earlier, the former head of the Australian Competition and Consumer Commission, Allan Fels, said US-style divestiture laws were needed to break up supermarkets.

Professor Fels said companies found to have breached competition laws should be forced to divest.

"It's only occasionally used (in the US) but with very powerful effect and I think it would be sensible for Australia to," he said.

"It's a structure of concentration that creates a capacity to do harm to consumers and to other businesses, and on occasions, the right answer is to break up the firm."

Australia has one of the most concentrated food retail sectors in the world, with Coles and Woolworths accounting for an estimated two-thirds of the market.

The consumer watchdog is doing its own probe into the supermarket sector.

ACCC deputy chair Nick Keogh said while the watchdog had no formal position on divestiture powers, it could be used to lower supermarket prices.

"It's conceivable that divestiture could be a tool that's employed and it could be that it could force the creation of a more competitive market, which, ultimately you expect, reduce prices," he said.