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Australian regulator starts legal action against Coles

Post a commentBy Andrew Schreiber , 05-May-2014

The Australian Competition and Consumer Commission (ACCC) has started proceedings in the Federal Court of Australia against local supermarket giant Coles over an alleged breach in the country’s consumer laws.

According to a statement from the ACCC, Coles engaged in unconscionable conduct in relation to its Active Retail Collaboration programme, in contravention of the Australian Consumer Law.

The watchdog has alleged that in 2011, Coles developed a strategy to improve its earnings by obtaining better trading terms from its suppliers, specifically the smaller ones.

“The conduct of Coles alleged by the ACCC in these proceedings was capable of causing significant detriment to small suppliers’ businesses,” Rod Sims, chairman of the ACCC, said.

“This could have resulted in these businesses becoming less able to plan and less able to innovate in the market, with resulting reduced economic efficiency and consumer detriment,” he added.

The rebate rope

One of the ways Coles sought to improve its earnings, according to the ACCC, was through the introduction of ongoing rebates to be paid by its suppliers in connection with the Coles ARC programme, based on purported benefits to large and small suppliers that Coles asserted had resulted from changes Coles had made to its supply chain. 

The ACCC alleges that Coles’ target was to obtain $16 million in ARC rebates from smaller suppliers. 

“Coles was ultimately seeking an ongoing ARC rebate in the form of a percentage of the price it paid for the suppliers’ grocery products, which, for its smaller suppliers, was the sum of a percentage which Coles asserted was referable to the value to the supplier of being able to access the Coles supplier portal and, where applicable, a percentage based on the asserted value to the supplier for Coles having changed its ordering patterns to order products in ‘economic order quantities’,” the statement said.  

Threats were made 

The ACCC also alleges that Coles asked 200 of its smaller suppliers to sign up with its rebate programme within a matter of days. 

If these suppliers declined to agree to pay the rebate, Coles personnel were allegedly instructed to escalate the matter to more senior staff, and to threaten commercial consequences if the supplier did not agree, it added. 

The ACCC alleges that, in a number of cases, threats were made when suppliers declined to agree to pay the rebate. 

In its legal filing, the ACCC has alleged that Coles has engaged in unconscionable conduct towards 200 of its smaller suppliers by “providing misleading information to suppliers about the savings and value to them from the changes Coles had made; using undue influence and unfair tactics against suppliers to obtain payments of the rebate; taking advantage of its superior bargaining position by, amongst other things, seeking payments when it had no legitimate basis for seeking them; and requiring those suppliers to agree to the ongoing ARC rebate without providing them with sufficient time to assess the value, if any, of the purported benefits of the ARC programme to their small business.”

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