A new legal precedent has been established after Coles was hit with a $10 million penalty when the Federal Court found it had acted unconscionably towards some of its suppliers in 2011.

As a result of a long-running investigation into supplier complaints in the supermarket sector, the ACCC launched two cases against Coles in 2014 which were resolved just before Christmas. As well as the hefty fine, Coles must also establish a formal process to provide options for redress for over 200 suppliers referred to in the proceedings.

Related Coverage
Retail rebates in spotlight as ACCC launches serious action against Coles supermarkets
Round Two: ACCC launches new legal action against Coles in relation to treatment of suppliers

Coles managing director John Durkan said in a statement issued before the findings that, “Coles unconditionally apologises and accepts full responsibility for its actions in these supplier dealings.

“I believe that in these dealings with suppliers, Coles crossed the line and regrettably treated these suppliers in a manner inconsistent with acceptable business practice.”

In her judgment, Justice Gordon said:

“Coles’ misconduct was serious, deliberate and repeated. Coles misused its bargaining power. Its conduct was ‘not done in good conscience’. It was contrary to conscience. Coles treated its suppliers in a manner not consistent with acceptable business and social standards which apply to commercial dealings. Coles demanded payments from suppliers to which it was not entitled by threatening harm to the suppliers that did not comply with the demand. Coles withheld money from suppliers it had no right to withhold.

“Coles’ practices, demands and threats were deliberate, orchestrated and relentless.”

“Coles’ conduct was of a kind which merits severe penalty.  But for Coles making the admissions it has now made and acknowledging the gravity of its contravening conduct, the conduct and circumstances in which it was committed would have warranted imposing penalties at or close to the maximum the law permits”.

ACCC Chairman Rod Sims said it was a significant outcome for the supermarket sector and the business community in general. “Indeed this is one of the first findings of unconscionable conduct in a business-to-business context under the Australian Consumer Law,” he said.

“Much more important is the magnitude of the penalties imposed and the recognition by the Court that Coles’ conduct in its dealings with suppliers was unconscionable and in contravention of the Australian Consumer Law. This should send a clear signal to larger businesses generally about appropriate business conduct in commercial dealings with smaller suppliers,” Sims said.