Round Two: ACCC launches new legal action against Coles in relation to treatment of suppliers

The ACCC is again taking legal action against Coles, launching proceedings in the Federal Court yesterday over allegations that the supermarket giant engaged in unconscionable conduct in relation to its treatment of certain suppliers.

“The ACCC alleges that Coles took advantage of its superior bargaining position by demanding money from suppliers that it was not lawfully entitled to, and was, in all the circumstances, unconscionable,” ACCC chairman Rod Sims said.

The allegations relate to events in 2011 that Coles pursued agreements to have suppliers pay Coles “profit gaps” on their own goods, “being the difference between the amount of profit Coles had wanted to make on those goods and the amount it had achieved,” the ACCC said in a statement.

The new legal action has arisen out of the same investigation that sparked proceedings instituted by the ACCC against Coles on 5 May 2014 in respect to Coles’ Active Retail Collaboration (ARC) program.

The most recent legal proceedings concern conduct which occurred in the course of Coles’ day to day interactions with suppliers, rather than in the ARC program specifically.

The ACCC also alleges that Coles pursued agreements, both retrospectively and prospectively,  for suppliers to pay the supermarket for amounts it claimed as ‘waste’ on a supplier’s goods which occurred after Coles had accepted the goods, and price reductions, or “markdowns” implemented by Coles to clear goods.

Thirdly, the ACCC alleges that Coles imposed fines or penalties on suppliers for short or late deliveries.

“It is alleged that the causes of both profit gaps and “waste and markdowns” were usually outside the control of suppliers, and that the amount of the fines Coles imposed was unrelated to the value of the goods, to any loss that Coles might actually have suffered from the short or late delivery, or to the reasons for the short or late delivery,” the ACCC said.

Coles has rejected the claims, saying in a statement that the ACCC’s allegations concern a limited number of dealings with five Coles suppliers three years ago.

“For context, Coles has over 4,000 suppliers, and is in contact with many of them on a daily basis. It has millions of individual contacts with suppliers every year. All five suppliers continue today to be valued suppliers to Coles.”

The statement said the allegations concern “normal” topics for business discussions between grocery suppliers and retailers in Australia and around the world and that “commercial negotiations can be robust” in any industry.

The case may set a precedent for the broader retail industry, with Sims stating that the proceedings “will provide the Court with an opportunity to consider whether conduct of this nature, if proven, is unlawful in the context of large businesses dealing with their suppliers.”

“This is a matter of significant public interest involving allegations of unconscionable conduct by a large national company in its dealings with small business suppliers in the highly concentrated supermarket industry,” he said.

The ACCC is seeking pecuniary penalties, declarations, injunctions and costs.

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