New rights for food and grocery suppliers

The Food and Grocery Industry Code of Conduct has been tabled in Parliament, in a move the AFGC has called “a step towards levelling the playing field.”

The voluntary code prohibits specific types of unfair conduct by retailers and wholesalers in their dealings with suppliers and provides a clearer framework for these dealings. It complements existing protections for suppliers under the Competition and Consumer Act 2010, including the unconscionable conduct provisions.

“Businesses that supply groceries to major retailers and wholesalers will have extra protections under the new industry code,” ACCC Chairman Rod Sims said.

“The code also provides new powers for the ACCC. Once retailers and wholesalers sign up to the code, we will be able to enforce it and take court action for breaches. We will also be able to audit retailers and wholesalers to check that they are complying with the code.”

“Coles, Woolworths and the Australian Food and Grocery Council worked closely to develop the code. We expect these retailers will sign up to it shortly,” Sims said.

The Australian Food and Grocery Council (AFGC) said the tabling in Parliament is a step towards levelling the playing field for food and grocery suppliers in their transactions with the major supermarkets.

AFGC CEO Gary Dawson welcomed the announcement by the Minister for Small business Bruce Billson as integral to achieving a meaningful and enforceable Code that will drive behavioural change to encourage fair and effective competition in the long term interests of consumers.

“We congratulate the Government for progressing the Code as an industry-led solution to problems impacting on suppliers and consumers,” Dawson said. “The Code was developed initially through negotiations with Coles and Woolworths, and it was their willingness to come to the table and develop a meaningful Code that made it possible.

“Signing onto the Code will be a mark of the retailers commitment to fair dealing and to improving the operation of one of the most dynamic and competitive sectors of the economy – the fast moving consumer goods sector.

 “The Code will now be tabled in Parliament as a regulation under the Competition and Consumer Act 2010 to give it real teeth,” Dawson said.

Key aspects of the Code:

  • The requirement for retailers and wholesalers to act in good faith
  • The requirements of agreements between retailers or wholesalers and suppliers, including that they be in writing
  • Tough restrictions on retrospective and unilateral variations to grocery supply agreements and the requirement for any variation and the reason to be in writing,
  • Greater transparency on the basis of shelf allocation for branded and private label products;
  • Recognition of the importance of intellectual property rights and confidentiality in driving innovation and investment in new products; and
  • A low cost and fast track dispute resolution mechanism. 

ALDI Australia has announced it will be signing up to the Code as a party.

A spokesperson for ALDI Australia said "ALDI Australia has always supported the principle of a strong and sustainable Australian grocery industry for both suppliers and retailers, with an emphasis on fairness throughout all business dealings.

"The provisions of the Code reflect ALDI’s current practice with suppliers: forging long term, stable, sustainable relationships and working closely in partnership to provide Australian shoppers with high quality products at permanently low prices."

 

Coles may face $5 mill in penalties for bread claims

The ACCC is seeking penalties of at least $4-5 million over Coles’ Australian consumer law breaches for its “fresh” bread claims.

In a penalty hearing in the Federal Court on Tuesday, Colin Golvan, SC, said a hefty fine was appropriate due to the size of the company, scale of conduct and consumer reach, Fairfax Media reports.

“This case is one in which consumers are led to the cash register on the basis of misconceptions about the manufacturing process,” Golvan said.

But lawyers for Coles debated the severity of the misleading conduct, saying continuing strong sales of partially baked bread, despite revelations it was not made wholly in-store, showed the consumer “doesn't care.”

Philip Crutchfield, SC, for Coles, said "just because we're big, we shouldn't get hit with a record fine".

In June 2013, The ACCC launched legal proceedings against Coles, accusing the supermarket of engaging in deceptive and misleading conduct, relating to the claims on various ‘Cuisine Royale’ and ‘Coles Bakery’ branded bread products.

One year later, the federal court ruled that the supermarket misled shoppers by claiming that its bread together with a range of other baked goods were “freshly baked” or “Baked Fresh” when it had actually been par baked months earlier in factories overseas.

Coles was then slapped with a three year ban on advertising that its bread was made, or baked on the day that it’s sold.

 

Senator criticises ACCC’s decision not to oppose Primo takeover

Nationals Senator for New South Wales John Williams has called the ACCC’s decision not to oppose the proposed acquisition of Primo by JBS “very disappointing.”

As part of the review process, Williams lodged submissions on behalf of concerned people in the livestock industry, and their common worry was that the takeover would lessen competition at the saleyards.

Senator Williams said the ACCC agrees there is some lessening of competition, but then claims it is not a substantial lessening of competition.

He said the ACCC claims Primo is not a strong competitive restraint on JBS and tries to justify the distance of more than 500 kilometres between Primo’s Scone abattoir and JBS’s Queensland abattoirs to support its case.

“This is out of touch with reality because cattle can and are transported many hundreds, even thousands of kilometres,” Williams said.

“I find it confusing that on one hand the ACCC will not oppose this acquisition, yet in the next breath says it is wary of the potential impact of the further consolidation of abattoirs. If that is true, why didn’t it act in this instance?

“From talking with farmers and those in the livestock selling industry I know this decision will be met with dismay and only time will tell whether it is right,” Williams said.

 

ACCC steps back for JBS’s acquisition of Primo

The Australian Competition and Consumer Commission (ACCC) will not oppose JBS USA Holdings Inc’s (JBS) acquisition of Australian Consolidated Food Holdings Pty Limited (Primo) after it determined that Primo is not currently a strong competitive constraint on JBS.

The ACCC received submissions from a range of interested parties, including farmers, competing abattoirs, and meat and small goods suppliers and customers. Many industry participants expressed concern that the proposed acquisition would result in less competition in the market for the acquisition of fat cattle in northern NSW and Queensland.

“The ACCC undertook a detailed assessment and determined that Primo is currently not a strong competitive constraint on JBS. JBS’s abattoirs in Queensland and Primo’s abattoir at Scone are more than 500km apart,” ACCC chairman Rod Sims said.

“Furthermore, the increase in market share as a result of the proposed acquisition would be relatively small and JBS would continue to be constrained in the market for the acquisition of fat cattle by a number of alternative abattoirs and supermarket chains, in the northern NSW and southern Queensland region.”

While the ACCC determined that, in this instance, the proposed acquisition would be unlikely to raise significant competition concerns, the ACCC is wary of the potential impact of further consolidation of abattoirs.

“The ACCC will continue to monitor this industry and any future acquisitions will face additional scrutiny,” Sims said.

The ACCC also considered whether the proposed acquisition would have any competitive impact on meat customers, small goods customers or the provision of fat cattle service kills, but did not consider that any significant competition concerns arose.

JBS signed the $1.45 billion conditional agreement to acquire Primo Smallgoods in November last year.

The move is set to leverage Primo’s growing export operations across Asia, including China, and is consistent with the global strategy of JBS – which is the largest animal protein processing company in the world – to grow its presence in value-added products.

In addition to Primo, JBS Australian announced in July that it had purchased a majority shareholding in the family owned, Sydney based company, Andrews Meats.

JBS USA Holdings Inc is a meat processor listed on the Brazil stock exchange with ten processing plants in Australia, including beef processing capacity in Dinmore and Toowoomba in southern Queensland. JBS Australia processes beef, veal, lamb and mutton. JBS Australia also processes pigs on behalf of a third party at its Devonport plant in Tasmania.

Primo is majority owned by Affinity Equity Partners (a private equity firm based in Singapore) and produces processed beef, pork and smallgoods. Primo’s key smallgoods brands are Primo and Hans. It has a beef processing plant at Scone, NSW, and a pork processing plant at Port Wakefield, South Australia. It has manufacturing facilities at Chullora, NSW, and Wacol in Queensland.

 

The Year in Focus: Video

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This week Food magazine takes a look back at the year that was in the food manufacturing industry with a rundown of the biggest news to affect the sector in the last twelve months.

 

ACCC takes action against Ecoeggs supplier for free range claims

The ACCC has instituted proceedings in the Federal Court against Ecoeggs’ supplier alleging that their use of ‘free range’ was false and misleading.

The Australian Competition and Consumer Commission (ACCC) has instituted proceedings in the Federal Court against Derodi Pty Ltd (Derodi) and Holland Farms Pty Ltd (Holland) alleging that their use of ‘free range’ in relation to their Ecoeggs, Field Fresh and Port Stephens egg brands was false and misleading.

Derodi and Holland have a business known as Free Range Egg Farms. The business supplies eggs under the label Ecoeggs nationally, and under the labels Port Stephens and Field Fresh Free Range Eggs in New South Wales.

The ACCC alleges that Derodi and Holland made false, misleading or deceptive representations on egg cartons, websites, a Facebook page and a Twitter account to the effect that the eggs supplied and labelled as “free range” were produced:

  • by hens that were farmed in conditions so that the hens were able to move about freely on an open range on every ordinary day; and/or
  • by hens, most of which moved about freely on an open range on most days.

The ACCC alleges that the hens used to produce the eggs for the Free Range Egg Farms business were not able to move about freely on an open range on an ordinary day because of the farming practices and conditions of the farms where the hens were kept.

The ACCC also alleges that most of the hens did not move about freely on an open range on most days.

“The ACCC considers that free range means more than animals just having potential access to the outdoors,” ACCC Chairman Rod Sims said.

“Consumers expect free range to mean animals genuinely can and do go outside on most days.”

The ACCC has asked the Court for declarations, injunctions, pecuniary penalties, orders for the implementation of compliance programs, corrective notices and costs.

The proceedings are set down for a directions hearing in Sydney at 9.30am on 4 February 2015 before Justice Edmonds.

This case forms part of a wider investigation by the ACCC into free range claims made by egg producers.

The ACCC understands that there are a number of farming conditions that impact on whether hens are able to, and do, move freely on an open range each day. The conditions (and their impact) vary between producers and no single condition of itself is conclusive. The relevant conditions include:

  • the internal stocking density of sheds
  • the conditions of the internal areas the hens are housed in
  • the number, size and location of any openings to an outdoor area
  • the time of the day and how regularly the openings are opened
  • the size and condition of the outdoor area, including any shaded areas, the presence of food, water and different vegetation and ground conditions
  • the stocking density of any outdoor area, and
  • whether the hens have been trained or conditioned to remain indoors.

In November,  Rod Sims said the ACCC sees no need for a free range standard, arguing it’s the producer’s responsibility to ensure they’re not misleading consumers.

“We are encouraging them to consider whether they should review the words and images used on their free range egg cartons and any advertising claims about their free range eggs.

“Some have expressed concern that there is no government standard that producers need to meet to be a free range producer. We see no need for any standard,” he said.

 

Bera Foods penalised $10k for fake honey

Bera Foods has been penalised after the ACCC found its labelling of "Hi Honey" misrepresented the product.

Hume Import & Export (Australia) Pty Ltd trading as Bera Foods has paid a penalty of $10,200 following the issue of an infringement notice by the Australian Competition and Consumer Commission.

The ACCC considered that by using the word “Honey” and including a map of Australia on the “Hi Honey” label, Bera Foods had misrepresented the product was Australian honey when in fact the product was predominantly composed of plant sugars and was produced in Turkey.

The infringement notice was issued to Bera Foods because the ACCC had reasonable grounds to believe Bera Foods had made a false or misleading representation about the composition of Bera Foods’ “Hi Honey” product, in contravention of the Australian Consumer Law.

“The ACCC was concerned in this case because although “Hi Honey” was labelled as honey, the product was not actually honey produced by honey bees. Honey suppliers must ensure any products they sell as “honey” are in fact produced entirely by honey bees,” ACCC Commissioner Sarah Court said.

“Further, the inclusion of a prominent map of Australia on the Hi Honey label may have led consumers to conclude the product was produced in Australia when this was not the case. Credence claims such as this are a priority area for the ACCC, to ensure consumers are given accurate information about the content and origin of products,” Ms Court said.

Earlier this year, the ACCC issued three Infringement Notices and accepted a court enforceable undertaking in relation to “Victoria Honey”, which was not produced by honey bees and was not a product of Victoria, Australia.

Recently, the ACCC also took steps to ensure suppliers of “Sunshine Honey”, “Hecham Honey”, “Brezzo Italian Red Gum Honey”, “Meg Myucku 100% natural honey” and “Golden Honey” ceased supply of the product and withdrew remaining stocks of the product from wholesale customers, because each of these products labelled as honey was not entirely produced by honey bees.

 

ACCC sees “no need” for free range standard

Addressing the Australian Farm Institute Conference in Melbourne, ACCC chairman Rod Sims said the commission will be writing to egg suppliers this week.

Sims said the ACCC sees no need for a free range standard, arguing it’s the producer’s responsibility to ensure they’re not misleading consumers.

“We are encouraging them to consider whether they should review the words and images used on their free range egg cartons and any advertising claims about their free range eggs.

“Some have expressed concern that there is no government standard that producers need to meet to be a free range producer. We see no need for any standard,” he said.

“In the Pirovic case the court ruled that free range means the birds can and do go outside on most days. It is up to producers to determine how to meet this common sense definition.”

In September, egg producer Pirovic Enterprises was found to have engaged in misleading conduct and made misleading representations in its labelling of eggs as free range. The Court ordered the brand to pay a pecuniary penalty of $300,000.

Pirovic’s claims and labelling suggested that eggs were produced by hens which were able to move about freely on an open range each day, but Pirovic admitted most of its hens did not move about freely on an open range on most days.
 

Coles v ACCC: finding the balance between fair trading and competition

In the space of just six months, the Australian Competition and Consumer Commission has launched two major cases against supermarket giant Coles for alleged unconscionable conduct against its suppliers.

The cases involve allegations of various forms of unfair treatment of suppliers, including harsh and oppressive tactics directed at extracting supplier rebates for claimed supply chain savings, pursuit of payments to cover “profit gaps”, payments to cover “waste” beyond the supplier’s control and penalties for short or late deliveries.

The basis for the actions is essentially that such behaviour oversteps the mark in what would be regarded as legitimate or fair trading relations.

These actions are to be applauded. That is not intended as a comment on their likely success. Coles has said that it will vigorously defend the allegations and it goes without saying that the ultimate outcomes are highly uncertain. It should also be acknowledged that since the conduct alleged in these cases took place, Coles has been party to drafting of a code of conduct relating to retailer-supplier relations, and has developed its own supplier charter.

The ACCC’s cases do not involve allegations that Coles acted anti-competitively or, more specifically, that the conduct involved a misuse of market power. This is significant. Much of the debate surrounding the retail grocery sector in recent years has been focused on its competitiveness.

Competition at any cost?

Yet the “experts” keep telling us that the market is workably competitive and that consumers are benefiting – pointing to staples such as milk and bread prices. The ACCC reached this conclusion in its 2008 inquiry into the sector and the recently released Harper Review appears to share this view.

Essentially, the issue raised by the ACCC’s allegations is whether we want competition at any cost. Do we prize lower prices at the expense of other interests or values?

Social research indicates while we welcome productivity measures that increase competition and lower prices, we also feel uncertain about the extent to which free markets guarantee us an overall improvement in our quality of life.

We are concerned about the threat from competition to other interests that we value, like income equality, environmental sustainability and opportunities for domestic employment. Less tangibly, but as importantly, there is a sense that unbridled competition threatens our traditional attachment to the land, the iconic image of the ‘Aussie battler" and our cultural ethos of a “fair go”.

This general tension is played out vividly in the context of supermarkets. Consumer patronage of chains at the expense of smaller retail outlets has risen over the last decade, due to lower prices on a wider range of products, shopping convenience and flexible hours. But consumers have a “love/hate” relationship with Coles and Woolworths. They feel resentful and distrustful of the very shops that they patronise, often because they see the chains as undermining the character and amenity of their communities.

These sentiments are consistent with the evidence of general public mistrust of “big business”, a concern that large companies have excessive power and scepticism of the relationship between government and business.

In spite of demands by business to “cut red tape”, the public expects that economic activity will operate within a framework of rules, and strongly supports government intervention to protect consumers, communities, the environment and workers.

Competition is seen as being by its nature a brutal process, but we are not prepared to accept brutality and destruction in other spheres of social interaction. Nor should we in the context of market dynamics. In my opinion, there is a legitimate role for fairness in the way in which businesses deal with each other – as competitors, customers and suppliers.

It is worth remembering that despite its name, the Competition and Consumer Act is not just directed at providing for consumer protection and promoting competition. Section 2 makes it clear that it is intended to enhance the welfare of Australians, including through provision for fair trading. “Welfare” is not defined in the statute and while the contemporary pre-occupation of theorists in this field is with “consumer welfare”, there is not a compelling justification for defining it so narrowly.

Instead, “welfare” in this context could be associated instead with the more encompassing concept of “wellbeing”. After all, there is no shortage of evidence from the economic happiness literature that self interest and wealth maximisation (the premises of competition policy, narrowly conceived) are not necessarily a guarantee of greater happiness, or wellbeing in a holistic sense.

Fairness and competition

Outside of the purview of fairness for consumers, “fair trading” has been the sleeper in the last 40 years of development in our trade practices law. It has been largely missing from the policy debate and appears to have been a low enforcement priority. I am pleased to say that there are signs that this is changing.

The government has not just a productivity policy, where competition is the central tenet, but also a small business policy, which speaks of “the vital contribution that the [small business] sector makes to our economy and our communities".

Small Business Minister Bruce Billson MP proposes to extend unfair contract protections to small business (explicitly acknowledging the need to recognise an “ethical norm of fairness” in business dealings). This sits along with the proposed code of conduct governing contractual relations between supermarkets and suppliers and includes a proposed requirement of “good faith”.

The ACCC’s recent enforcement actions reflect its annual statement of enforcement priorities and demonstrates commitment to exploring the bounds of the prohibition on “unconscionability” as it applies to business-to-businesss transactions in the legislation. In its media release accompanying the latest Coles action, ACCC Chairman, Rod Sims, said:

“The ACCC has commenced these proceedings because it considers the alleged conduct was contrary to the prevailing business and social values which underpin business standards that apply to dealings with suppliers.”

But clearly there is still much work to be done, including tackling the big questions – such as what is “fairness”? In interpreting the unconscionability laws, the courts speak of “conduct against conscience”; conduct assessed against “moral and normative standards, broadly cast”. But how are those standards defined? They need to be given more content, no matter how daunting that task may seem.

The ACCC cases against Coles will not address all of the concerns that surround supermarkets in this country. But in bringing this litigation the ACCC is making a substantial contribution to an informed debate about what value should imbue business dealings.

Is it possible to reconcile the potential conflict between the inherently unfair process of competition and fairness in business dealings? Can we realistically have both? And, if so, when is one to be prized above the other? For example, would consumers accept higher grocery prices if it meant that farmers and suppliers could be treated more “fairly”? When and how do policymakers and the ACCC strike the right balance between these two concerns?

Whose responsibility?

Should, for instance, government be responsible for fostering and protecting fairness in business dealings, or should we expect our business leaders to also take some responsibility? This expectation would recognise businesses not just as economic but as social and political actors in our society and place expectations on them accordingly.

It appears that some in the business sector recognise and embrace this. Despite the scathing criticism that it sometimes attracts and regardless of the outcome of the current cases, Coles deserves recognition for its commitment to regional communities through not-for-profit projects such as SecondBite (which it has donated $5 million in meals to disadvantaged families over the last four years).

These are questions actively being explored by our political leaders and those who are in the position to influence directly the nature of the policies, law and enforcement action that impact on our lives. We should support them in this endeavour – by continuing to engage in the discourse and ensure our voices are heard in a debate, the outcomes of which will have fundamental and long term implications for how we feel about being Australian.

The Conversation

Caron Beaton-Wells does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.

Supermarket practices need to be tested in court: AFGC

The AFGC says the practices of Australia’s leading supermarkets should be tested in court, following the ACCC’s claims that Coles has engaged in “unconscionable conduct” with its suppliers.

The ACCC has instituted proceedings in against Coles in the Federal Court, with ACCC chairman Rod Sims claiming, “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.

“The ACCC has commenced these proceedings because it considers the alleged conduct was contrary to the prevailing business and social values which underpin business standards that apply to dealings with suppliers.

“These 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,” Sims said.

The Australian Food and Grocery Council’s (AFGC) chairman, Gary Dawson, said it’s time claims like these were officially tested in court.

"Over recent years, there have been widespread reports of these sorts of practices being deployed by the major supermarkets to boost their bottom line at the expense of their suppliers," Dawson told the ABC.

"So it's very important these practices be tested in court, these allegations be tested thoroughly because it's in everyone's interests, including consumers, that there be a fair and competitive market.”

Coles is rejecting the claims, arguing that the communications with the suppliers referred to in the ACCC’s Statement of Claim were part of ongoing commercial negotiations involving a much broader, longer-term trading relationship with each of the five suppliers mentioned.

“These are normal topics for business discussions between grocery suppliers and retailers in Australia and around the world. Furthermore, commercial negotiations can be robust, regardless of the industry or sector,” the supermarket said in a statement.

The matter is listed for a directions hearing in Melbourne on 24 October, 2014.

 

Coles rejects ACCC’s ‘unconscionable conduct’ claims

Supermarket giant Coles has rejected claims of alleged unconscionable conduct by the ACCC.

The competition watchdog yesterday announced that it will be instituting proceedings in the Federal Court against the supermarket over allegations that it took advantage of its superior bargaining position by ‘demanding money from suppliers that it was not lawfully entitled to.’

“The ACCC has commenced these proceedings because it considers the alleged conduct was contrary to the prevailing business and social values which underpin business standards that apply to dealings with suppliers,” ACCC chairman Rod Sims said in a statement.

“These 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.”

Coles says that the allegations specifically concern a limited number of dealings with five Coles suppliers in the lead up to the Christmas 2011 trading period in addition to issues related to waste and damaged products. Coles says that communications with the suppliers referred to in the ACCC’s Statement of Claim were part of ongoing commercial negotiations involving a much broader, longer-term trading relationship with each supplier.

“These are normal topics for business discussions between grocery suppliers and retailers in Australia and around the world. Furthermore, commercial negotiations can be robust, regardless of the industry or sector,” the supermarket said in a statement.

“The allegations include a day previously called Profit Day. This was an administrative day where discussions were held with suppliers in relation to outstanding claims and additional business opportunities.

“These discussions, including those concerning profit gaps, were aimed at improving the profitability of products. Profit gaps can occur when a product’s financial performance fails to meet business plans or expectations discussed between Coles and its suppliers. Products with poor sales performance limit Coles’ ability to deliver value to customers.”

Coles also added that the failure of suppliers to deliver agreed quantities of stock at agreed times, high levels of waste due to delivering products too close to their use by date, mishandling/ packaging damage and the poor performance of products in general are all issues that are “actively managed” by the supermarket.

The proceedings have risen out of the same investigation that was instituted by the ACCC against Coles on 5 May in respect to Coles’ Active Retail Collaboration (ARC) program.

In June, Coles categorically denied claims it engaged in unconscionable conduct by forcing suppliers to pay an additional rebate.

As part of the Statement of Claim, the ACCC is seeking pecuniary penalties, declarations, injunctions and costs. The matter is listed for a directions hearing in Melbourne at 10am on Friday 24 October 2014 before Justice Gordon.

 

ACCC takes further action against Coles

The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court of Australia against Coles Supermarkets Australia Pty Ltd and Grocery Holdings Pty Ltd (together, Coles) alleging that Coles engaged in unconscionable conduct in contravention of the Australian Consumer Law (ACL).

“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,” ACCC chairman Rod Sims said.

“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.”

“The ACCC has commenced these proceedings because it considers the alleged conduct was contrary to the prevailing business and social values which underpin business standards that apply to dealings with suppliers,” Sims said.

“These 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.”

The proceedings have risen out of the same investigation that was instituted by the ACCC against Coles on 5 May in respect to Coles’ Active Retail Collaboration (ARC) program.

In June, Coles categorically denied claims it engaged in unconscionable conduct by forcing suppliers to pay additional rebate.

“The proceedings relating to ARC allege unconscionable conduct in the design and implementation of the ARC program specifically, whereas these new proceedings concern conduct which occurred in the course of Coles' day to day interactions with suppliers,” Sims said.

In the latest proceedings, the ACCC alleges that in 2011, Coles, outside of its trading terms with the suppliers concerned:

  • pursued agreements to pay Coles for “profit gaps” on a supplier’s goods, being the difference between the amount of profit Coles had wanted to make on those goods and the amount it had achieved;
  • pursued agreements to pay Coles, both retrospectively and prospectively, 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;
  • 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 alleges that Coles took advantage of its superior bargaining position and sought to achieve these outcomes by, among other things:

  • demanding agreements to pay money where it knew, or ought reasonably to have known that it had no legitimate basis for doing so;
  • failing to provide adequate information to suppliers to allow them to understand the basis upon which the demands were made;
  • applying undue pressure by, in some cases:

    • threatening measures that were commercially detrimental to the suppliers if they refused to agree to payments;
    • by pressing suppliers for urgent responses to agree to payments; or
    • by making multiple demands of suppliers for different types of payments;
  • withholding money due to suppliers and refusing to repay money when it knew it was not entitled to retain it.

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

The matter is listed for a directions hearing in Melbourne at 10am on Friday 24 October 2014 before Justice Gordon.

In September, Coles was banned from advertising that its bread was made, or baked on the day that it’s sold for three years, following an investigation by the ACCC.

 

ACCC expands on oyster spat levy proposal

The Australian Competition and Consumer Commission (ACCC) has issued a draft determination proposing to allow Australian Seafood Industries (ASI) to collect a levy, in conjunction with hatcheries, on the purchase of Pacific oyster spat.

The levy will enable ASI to undertake research into developing spat with resistance to the Pacific Oyster Mortality Syndrome (POMS).

POMS has a 90-100 per cent mortality rate in infected Pacific oysters, and outbreaks have occurred in Pacific oysters in France, the United Kingdom, Ireland, the Netherlands and New Zealand. More recently, POMS outbreaks have occurred in the Georges and Hawkesbury rivers in New South Wales, and in wild Pacific oysters in Brisbane.

The levy will be collected from oyster growers who purchase Pacific oyster spat from hatcheries. The levy will commence at $2.80 per 1000 spat, indexed annually by CPI. ASI seeks authorisation to collect the levy for a period of up to ten years.

“An industry-wide levy is an efficient way to fund important research that seeks to protect Australian Pacific oyster growers from the potentially devastating impact of POMS,” ACCC Commissioner Jill Walker said.

On 14 August 2014, the ACCC granted interim authorisation to allow ASI to introduce the levy and commence its research and development activities, while the ACCC considers the request for authorisation.

Interim authorisation will remain in place until the date the ACCC’s final determination comes into effect or until the ACCC decides to revoke interim authorisation.

Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.

 

ACCC “concerned” over Wagyu labelling

The ACCC has been considering the use of ‘Wagyu beef’ claims in relation to certain beef products being sold to Australian consumers. 

In a statement, the ACCC said it “has received complaints that in some instances beef products derived from Wagyu crossbred cattle, that is a mix of Wagyu and other breeds of cattle, have been marketed as ‘Wagyu beef’ without further clarification.

“The ACCC is concerned that the labelling of beef from crossbred cattle as ‘Wagyu’ may have the potential to mislead consumers into thinking that the beef is derived from the Wagyu breed of cattle.”

In its statement, the ACCC said one of its current priorities is credence claims, “particularly those with the potential to have a negative impact on competition in the marketplace or on small businesses. Credence claims are representations about a premium or special characteristic of a good or service and can relate to the ingredients, the source of the product, the production method used or any other factor which differentiates the product from other similar products.”

“False or misleading credence claims can adversely affect consumers, who are often willing to pay a premium for products that are claimed to have this premium or special characteristic. False or misleading claims can also harm competitors who often incur additional production costs in order to be able to legitimately make a premium claim.”

At this stage, the consumer watchdog said it is seeking information in relation to this issue.

 

GrainCorp granted a regulation reduction

The ACCC has granted an exemption for GrainCorp’s Carrington terminal at the Port of Newcastle under the Code on bulk wheat terminal access.

The Australian Competition and Consumer Commission (ACCC) has granted an exemption for GrainCorp’s Carrington terminal at the Port of Newcastle under the new mandatory Code on bulk wheat terminal access.

The Code commenced on 30 September 2014, replacing the previous regime of access undertakings administered by the ACCC. It regulates monopoly bulk wheat port terminal operators to ensure that exporters have fair and transparent access to terminal facilities.

The exemption began on 1 October 2014, and means that GrainCorp’s Carrington facility will continue to be subject to a minimal level of regulation under the Code, providing regulatory certainty for GrainCorp and industry. The exemption is in line with the ACCC’s decision in June to approve a variation to GrainCorp’s previous 2011 access undertaking to reduce regulation for the Carrington terminal.

“The ACCC considers that a more competitive market for the export of bulk wheat serves the interests of farmers and reduces the need for regulatory intervention. The level of regulation applied to bulk wheat port terminals should depend on the incentive and ability of the service provider to exert market power to damage competition,” ACCC Commissioner Cristina Cifuentes said.

“Granting the exemption for GrainCorp’s terminal at the Port of Newcastle is appropriate because there is competition at the port and across the supply chain in upstream and downstream markets, limiting GrainCorp’s market power.

“The ACCC is keen to reduce regulation where it is not necessary, such as where competition has developed. The ACCC expects to assess a number of other exemptions over the next year,” Cifuentes said.

The wheat ports Code represents the next stage in the deregulation of the bulk wheat export industry. The ACCC enforces the Code, and also has other specific roles, including granting exemptions under the Code.

 

Grocery code needs to be enforceable: ACCC

The ACCC has called for issues around enforceability and coverage to be addressed in the proposed grocery code of conduct, before a conclusion is reached.

Addressing the Australian Food and Grocery Council’s Industry Leaders Forum in Canberra, ACCC Chairman Rod Sims said a code of conduct that provides clear rights and legally enforceable norms of conduct would be of considerable assistance to food and grocery industry participants.

“However, many of the protections of the proposed Code are qualified and retailers and suppliers are able to agree to ‘contract out’ of Code provisions,” Sims said.

“This raises an issue of whether the Code will address the problems which industry has identified if norms of conduct in the Code are able to be traded away, rather than always enforceable.”

Sims also backed recent comments made by the Chairman of the Productivity Commission that Australia should stick with its successful strategy of favouring the many over the few by focusing on removing barriers to competition generally, rather than pursuing policies that favour particular sectors.

“I agree with him completely. So, it seems, does the Harper Panel review.

“We strongly agree with the review panel that there is a need to reinvigorate Australia’s competition policy, and ensure that it evolves.”

Sims welcomed the Harper Competition Review Draft Report and discussed proposed areas of microeconomic reform where the food and grocery sector stands to benefit.

“On road infrastructure provision and pricing, we support the panel’s recommendation on introducing cost-reflective road pricing linked to road construction, maintenance and safety,” Mr Sims said.

“Importantly, more effective road user charges can be offset by lower fuel taxes which currently account for one quarter of fuel prices.

“The ACCC also welcomes the draft recommendations to deepen competition in liner and coastal shipping services. This will also reduce your production costs."

In discussing proposed microeconomic reform,  Sims rejected the notion all the low hanging fruit has been picked, and that all the really important reforms have been made.

“The reforms to shipping are low hanging fruit, and can be implemented quickly. And the road reforms are fundamental to our economy.”

Sims also welcomed the review panel’s consideration of Australia’s competition laws.

“In doing so, they have clearly had regard to established international approaches to setting the appropriate boundaries of such laws.  Australia’s competition laws are behind international best practice in important respects.”

Sims broadly welcomed the Panel’s recommendation on “concerted practices”, the misuse of market power, and in relation to merger assessment.

In reporting on the ACCC’s recent compliance and enforcement activities, Mr Sims listed outcomes in area of credence claims including beer, pork, honey and free-range eggs.

“When making promotional claims about food or grocery products, the ‘who’, ‘what’, ‘where’ and ‘how’ must be accurate.”

 

Coles slapped with three year ban on bread ads

Following an investigation by the ACCC, Coles Supermarkets will be banned from advertising that its bread was made, or baked on the day that it’s sold for three years.

The Australian Competition and Consumer Commission (ACCC) launched legal proceedings against Coles in June last year, accusing the supermarket of engaging in deceptive and misleading conduct, relating to the claims on various ‘Cuisine Royale’ and ‘Coles Bakery’ branded bread products.

In his ruling back in June, Federal Court chief justice James Allsop said that claims made by Coles amounted to a misleading representation that the par baked bread products had been baked on the day of sale or baked in a fresh process using fresh not frozen product.

According to The Mercury, Allsop today ruled that the supermarket giant will be banned from promoting its bread as ‘baked today, sold today’ for a three year period. Coles must also inform consumers of the ban and communicate that it was found to have made false, misleading and deceptive representations in relations these products.

Coles still faces fines of up to $3 million over the claims, however the Federal Court has not yet confirmed if it will enforce the penalty.

 

“Free range” egg claims found to be misleading

The Federal Court has declared that Pirovic Enterprises Pty Ltd (Pirovic) engaged in misleading conduct and made misleading representations in its labelling and promotion of eggs as ‘free range’, in proceedings brought by the Australian Competition and Consumer Commission.

The Court ordered that Pirovic pay a pecuniary penalty of $300,000 and contribute to the ACCC’s costs.

From January 2012 until January 2014, Pirovic used egg cartons which included the words ‘Free Range’ and images of hens on open pasture.

The Court found that by labelling and promoting the eggs as ‘free range’, Pirovic represented to consumers that the eggs were produced by hens which were able to move about freely on an open range each day, and that most of the hens did in fact do so on most days but Pirovic admitted most of its hens did not move about freely on an open range on most days.

“Credence claims such as free range claims are powerful tools for businesses to distinguish their products. However, if they are false or misleading, they serve to mislead consumers, who may pay a premium to purchase such products,” ACCC Chairman Rod Sims said.

The Court found that the eggs supplied by Pirovic were produced by hens, most of which did not move about on an open range because of a combination of the following factors:

  • the stocking densities inside the barns where the hens were housed;
  • the flock sizes inside those barns; and
  • the number, size and placement and operation of the physical openings to the open range.

“This decision provides very clear guidance that any free range egg claim must be backed by farming conditions and practices implemented by suppliers under which hens actually move about on an open range each day,” Sims said.

This case forms part of an investigation by the ACCC into free range claims made by a number of egg producers across Australia. This investigation was initiated by the ACCC in response to community concerns.

There are a number of farming conditions that impact on whether hens are able to, and do, move freely on an open range each day.  The conditions (and their impact) vary between producers and no single condition of itself is conclusive.  The relevant conditions include:

  • the internal stocking density of sheds;
  • the conditions of the internal areas the hens are housed in;
  • the number, size and location of any openings to an outdoor area;
  • the time of the day and how regularly the openings are opened;
  • the size and condition of the outdoor area, including any shaded areas, the presence of food, water and different vegetation and ground conditions;
  • the stocking density of any outdoor area; and
  • whether the hens have been trained or conditioned to remain indoors.

 

ACCC issues draft decision on GrainCorp’s wheat port access undertaking

The Australian Competition and Consumer Commission has issued a draft decision proposing to consent to GrainCorp Operations Limited’s (GrainCorp) application to extend and vary its 2011 Port Terminal Services Access Undertaking.

GrainCorp’s 2011 Undertaking governs third-party access to port terminal services at GrainCorp’s East Coast Australian bulk grain ports. The undertaking is currently set to expire on 30 September 2014 with a mandatory code of conduct anticipated to commence on 1 October 2014.

GrainCorp has applied to extend the operation of the 2011 Undertaking for a year in the event that the code does not commence as expected. Under GrainCorp’s application, the undertaking remains virtually unchanged except for the inclusion of an early expiry clause to eliminate the possibility of duplicate regulation.

“The ACCC considers that the combination of a 12 month extension and an early expiry clause is a practical and appropriate response that provides certainty to industry about GrainCorp’s bulk grain port arrangements,” ACCC Commissioner Cristina Cifuentes said.

The ACCC’s draft decision is that GrainCorp’s proposed extension and variation of its 2011 Undertaking is appropriate. The ACCC’s draft consent is subject to GrainCorp incorporating reporting provisions on key service performance indicators to cover the period of the extension of the undertaking.

The ACCC is seeking any views from interested parties on its draft decision by 5 September 2014. Submissions received in response to the draft decision will be considered by the ACCC prior to making its final decision.