Maggie Beer Products acknowledges misleading conduct

Maggie Beer Products Pty Ltd has accepted a court enforceable undertaking for misleading customers following an investigation by the Australian Competition and Consumer Commission (ACCC).

Beer, who is the founder of Maggie Beer Products Pty Ltd, said that the investigation served as a wakeup call for her regarding accurate labelling and she has urged fellow manufacturers to carefully consider each message that is sent to consumers on product labels.

The incident in question involves four out of 200 products in the Maggie Beer range; extra virgin olive oil, aged red wine vinegar, rosemary and verjuice biscuits and ice cream –  all of which feature the Maggie Beer logo with the text “A Barossa Family Tradition” as well as “Made in Australia” or “Product of Australia” and the words: ‘Maggie Beer Products: 2 Keith Street Tanunda South Australia 5352’.

The ACCC considered that as a result of these representations, a reasonable consumer would have gained the overall impression that each of these products was manufactured in Tanunda, the Barossa Valley or South Australia.

While the products were initially made in the Barossa, as the company grew and demand rose, the company decided to outsource the manufacturing of these four product lines to third parties in Queensland and Victoria.

Beer says that she has now decided to modify all labels on all 200 products in her range with added information on the State in which each product is made.

In addition to the misrepresentations on product labels, Maggie Beer Products made representations to the public during a “Local Fair” held at a Woolworths supermarket in Mitcham, South Australia in April 2013 that its Ice cream and Rosemary and verjuice biscuits were made locally in South Australia which was not the case.

Maggie Beer Products has acknowledged that its product labelling, representations to the public at the “Local Fair” and representations to Woolworths were likely to have contravened sections 18 and 29(1)(k) of the ACL.

ACCC Chairman, Rod Sims said that consumers pay a premium price for local products and that the ACCC views the integrity of credence claims made about food products is a priority enforcement area.

“The Barossa Valley is a nationally recognised premium food and wine destination, and businesses in that region use place of origin claims to promote or distinguish their product from others in the market,” says Sims.

“Misleading representations about the origin of products to capitalise on this demand undermines the integrity of credence claims which are relied on by consumers and, equally important, can harm competing producers whose products are made locally.”

Maggie Beer said that she fully supports the ACCC’s interpretation on provenance in food labelling.

“All four of these products originally were made in South Australia but, as Maggie Beer Products grew to supply larger markets, we were unable to find suitable South Australian suppliers for four of our product lines.  In these four instances our labels, while  fully compliant with Food Standards Australia and New Zealand (FSANZ) labelling laws, did not reflect the ACCC’s interpretation of provenance in labelling,” she said.

“We acted immediately when the ACCC drew this to our attention.  Maggie Beer customers can be 100 percent sure on the provenance of the food that we offer. I apologise to anyone who may in the past have been misled in any way.

"It’s the last thing I would want to do.”

The misrepresentations come just months after Maggie Beer’s Daughter, Saskia Beer accepted a court enforceable undertaking from Saskia Beer’s Barossa Farm Produce Pty Ltd for false or misleading representations.

Between 9 December 2010 and 28 May 2013, Barossa Farm Produce made various representations that the pork used in its “The Black-Pig” smallgoods was from heritage Berkshire pigs, or other heritage black pig breeds; and/or free range pigs, when that was not the case.

Saskia Beer, Barossa Farm Produce’s sole director, also made representations at an Autumnal Cooking Class held at the Maggie Beer Farm Shop in April 2013 that the pork used in “The Black-Pig” smallgoods was from Berkshire or other black pig breeds, when that was not the case.

Maggie Beer has apologised to "anyone who feels they may have been misled" in the video below.

ACCC approves oyster spat levy

The Australian Competition and Consumer Commission has granted interim authorisation for 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), which has a 90-100 per cent mortality rate in infected Pacific oysters.

The levy will be collected from oyster growers who purchase Pacific oyster spat from hatcheries and 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 likely to be an efficient way to fund important research that seeks to protect Australian oyster growers from the potentially devastating impact of POMS," ACCC Commissioner Dr Jill Walker said.

“Interim authorisation allows ASI to introduce the levy and commence its research and development activities, while the ACCC considers the request for 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.

 

Misleading claims biggest cause of complaints: ACCC

Misleading claims are a continuing issue for the small business sector, according to the ACCC’s latest Small business in focus report.

The ACCC received over 1500 complaints in the 2013-2014 financial year for misleading conduct and false representations, followed by complaints over consumer guarantees (more than 900).

The watchdog also used a range of compliance and enforcement tools last financial year, to encourage compliance with the Competition and Consumer Act 2010, and achieved several significant court outcomes during the period that are relevant to small businesses.

The ACCC took action against Coles for claims that its “Cuisine Royal” and “Coles Bakery” bread was “Baked Today, Sold Today” and “Freshly Baked In-Store”. The Federal Court found that these claims were false, misleading and deceptive as the bread products were baked off site and frozen, and “finished” at in-store bakeries.

The ACCC also accepted a court enforceable undertaking from Carlton & United Breweries in relation to ACCC concerns that it represented that Byron Bay Pale Lager was brewed by a small brewer in Byron Bay when this was not the case.

“Small businesses often rely on a unique selling point to compete. If a large business presents a product as having a feature that it doesn’t, this can harm small businesses,” ACCC Deputy Chair Dr Michael Schaper said.

 

Coles’ takeover of IGA stores under scrutiny, ACCC

The Australian Competition and Consumer Commission (ACCC) has released a Statement of Issues outlining potential competition concerns with the proposed acquisition of four IGA stores in Western Australia by Coles Supermarkets.

The stores are located in Brusselton, Halls Head, Bunbury Forum and Dianella, and the ACCC’s preliminary view is that the proposed acquisition may result in a substantial lessening of competition in the areas.

“Market participants have expressed concern about losing the differentiated offering of their local progressive Supa IGA store.” ACCC commissioner Dr Jill Walker said.

“The ACCC considers that the differentiated offer of the Supa IGA stores reflects a competitive response to rival supermarkets and provides additional choice to consumers.”

“The ACCC is also concerned that the proposed acquisition would remove access to Supa IGA promotions for shoppers in these areas,” said Walker.

The final decision is set to be made on 14 August, 2014 and further submissions from the market in response to the Statement of Issues can be made until 24 July.

 

Jamie Oliver campaign success a “furphy”: AUSVEG

Woolworths has claimed its Jamie Oliver healthy eating campaign has been “great” for growers, but AUSVEG isn’t convinced.

Woolworths has said the campaign has received a “great response from customers” who are “buying more fresh food”, ABC Rural reports.

“It's great for our customers to be eating better and great for our growers to be selling more fresh produce,” Woolworths said in a statement.

But AUSVEG chief executive Richard Mulcahy said Woolworths’ does not have evidence to back its claims.

“Frankly, we're a bit sceptical about what benefits will flow to us,” Mulcahy said. “We'd like to see people increase their consumption, but I'd have to say that generic marketing of fruit and vegetables – there's a long history of this not having much impact.”

“In terms of the overall per capita consumption, we've seen very little movement in 20 years.”

“I don't think this will have any positive impact … I think that's a furphy. I think it's all about market share for a particular chain. Not one country in the world that has embarked in generic marketing has seen any per-capita increase in consumption,” he said.

The campaign has been heavily scrutinised by AUSVEG, who called upon the ACCC to investigate Woolworths’ behaviour, who are allegedly seeking contributions from Australia’s horticulturalists to pay for their Jamie Oliver campaign.

According to AUSVEG, the payment is in the form of a new 40c per crate charge on top of the 2.5 – 5 per cent fee growers are already required to pay Woolworths for them to market and promote their produce.

Woolworths said the contribution was entirely voluntary and that the contribution is less than 2 per cent of the cost of a case of produce.

AUSVEG then wrote to Jamie Oliver, requesting that he ask the retailer to give refunds to the farmers who have contributed to the campaign.

The Jamie Oliver Group responded and said Oliver is concerned, but has no sway with the grocery retailer.

In a letter to AUSVEG, the Jamie Oliver Group said “Jamie, naturally, is concerned when he hears about small producers suffering financial hardship and your letter will be discussed with Woolworths further at our next senior-level meeting to ensure farmers are completely clear about the aims of the program”.

 

Coles categorically denies unconscionable conduct claims

Supermarket giant Coles has categorically denied claims it’s engaged in unconscionable conduct by forcing suppliers to pay additional rebates for a new supply chain program.

According to SMH, Coles issued a 34 page document to the Federal Court in Melbourne on Monday (30 June) rejecting claims made by the Australian Competition and Consumer Commission (ACCC) that it used unfair tactics to force suppliers to pay ongoing rebates to participate in the Active Retail Collaboration (ARC) program.

The ACR program was developed by Coles in 2011 to improve earnings by obtaining better trading terms from its suppliers. The ACCC alleges that in relation to 200 of its smaller suppliers, Coles required agreement by the supplier to the rebate, which ranged from about 0.7 percent to more than one percent of sales, 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. The ACCC alleges that, in a number of cases, threats were made when suppliers declined to agree to pay the rebate.

The ACCC alleges Coles engaged in a number of acts of unconscionable conduct including:

  • 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.

Coles denies the claims, arguing participation in the program was voluntary and that it maintained trading relationships with suppliers regardless of their involvement.

 

NSW Poultry farmers allowed to collectively bargain

The ACCC has granted authorisation for members of the NSW Farmers’ Association who grow chicken, turkey and duck meat, to collectively bargain with processors.

Under the collective bargaining arrangements, poultry growers will form common interest ‘grower groups’ to collectively bargain the terms and conditions of contracts with the relevant poultry processor.

Currently there are 5 chicken and turkey processors in New South Wales – Inghams Enterprises, Baiada Poultry, Red Lea Chickens, Cordina Chicken Farms, Summertime Chicken, and one duck processor – Pepe’s Ducks.

Authorisation will chicken and turkey growers them to continue to collectively bargain with processors arrangements if the NSW legislation is removed, and for duck growers to begin collectively bargaining.

“Collective bargaining allows poultry growers to share transaction costs, such as employing expert advisors, which can improve their input into contracts,” ACCC deputy chair Dr Michael Schaper said.

“The arrangement may lead to more efficient contracts, which better reflect the circumstances of the growers and processor.”

The ACCC has granted authorisation for ten years.

Authorisation provides immunity from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010.

The ACCC may grant authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.

 

ACCC penalises “Victoria Honey” for misrepresentations

Basfoods (Aust) Pty Ltd (Basfoods) has paid penalties totalling $30,600 following the issue of three infringement notices by the Australian Competition and Consumer Commission (ACCC) in relation to Basfoods’ “Victoria Honey”.

The ACCC considered that Basfoods had misrepresented that its “Victoria Honey” was honey produced by honey bees on product labelling and on its website, when it was mainly comprised of sugars from plants including corn and sugar cane.

In addition, the ACCC also considered that by naming and labelling its product “Victoria Honey”, Basfoods had represented the product as originating from Victoria, Australia when in fact it was a product of Turkey.

The three infringement notices were issued to Basfoods because the ACCC had reasonable grounds to believe that the labelling of ”Victoria Honey” and Basfoods’ website contained false or misleading representations about the composition and place of origin of ”Victoria Honey”, in contravention of the Australian Consumer Law (ACL).

Basfoods has provided an enforceable undertaking to the ACCC in which it has admitted that its conduct contravened the ACL. Basfoods has undertaken to only sell product as honey if it is entirely produced by honey bees, and to regularly test its products, including honey. Basfoods will also publish a range of corrective notices.

“It is difficult for consumers to test claims by traders that a certain product is actually “honey” or is from a certain place of origin,” ACCC Chairman Rod Sims said.

“False claims of this kind not only mislead consumers but can also disadvantage competing honey suppliers, particularly those who source honey locally within Australia.”

“Honey suppliers should now be on notice that they must have a basis for selling a product as ‘honey’, which likely should include tests to confirm the product is in fact honey produced entirely by honey bees. The ACCC is aware of concerns in relation to other suppliers and products labelled as honey and will pursue these further with the benefit of the outcome in this matter,” Sims said.

Basfoods is an Australian company that supplies Mediterranean and Turkish food products. Basfoods supplied “Victoria Honey” to independent supermarkets, speciality retailers, online stores, delis, restaurants and cafes.  Basfoods also supplied “Victoria Honey” through its retail stores and via its website.

Basfoods supplied the Victoria Honey product in one and four kilogram containers from around January 2006 to 6 December 2013. 

 

Brands busted by the ACCC: The week in focus

In this week's newswrap-up, we look at three brands who've come under fire from the ACCC.

The federal court ruled Coles 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.

Smallgoods produced by Saskia Beer, daughter of popular chef Maggie Beer, were also in the spotlight, and the ACCC announced it's preparing to act on complaints from the bee industry that some cheap imported honey is mislabelled and does not meet local food standards.

For more information, check out the video below!

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ACCC reduces regulation at Graincorp’s Newcastle Port Terminal

The Australian Competition and Consumer Commission have accepted GrainCorp’s application to vary its Port Terminal Services Access Undertaking at its Newcastle bulk grain facility.

GrainCorp applied to the ACCC to vary its undertaking to allow its Carrington terminal in Newcastle to be subject to less access regulation. GrainCorp submitted that it now faces competition from two other bulk wheat export facilities, which are not subject to access regulation and argues that it is at a competitive disadvantage as a result.

 “The ACCC considers that a more competitive market for the export of bulk wheat is in the best interests of farmers. The variation will provide GrainCorp with greater flexibility to compete against the two bulk wheat export operations at the Port of Newcastle,” ACCC Commissioner Cristina Cifuentes said.

After examining the port of Newcastle and the surrounding port zone, the ACCC’s view is that there is a sufficient level of competition and capacity, such that the current level of regulation on GrainCorp is no longer required at that port.

“This application has allowed the ACCC to react to the market situation at Newcastle in a flexible way. The reduction in access regulation at GrainCorp’s terminal is an appropriate regulatory response to the more competitive market at Newcastle, and reflects the ACCC’s view that regulation should be fit for purpose” Cifuentes said.

The ACCC received submissions from the NSW Farmers Association and Cooperative Bulk Handling in response to its draft decision. Concerns raised by these parties have been considered in the decision to accept.

GrainCorp’s undertaking will continue to apply the existing level of access obligations at its six other port terminals.

The ACCC approves access undertakings for port terminal operators who also have bulk wheat exporting operations. Such operators must submit access undertakings to the ACCC in order to meet the ‘access test’ in the Wheat Export Marketing Act 2008 and be entitled to export bulk wheat.

For more information on the ACCC and wheat export, click here.

 

ACCC to act on mislabelled imported honey

The ACCC are preparing to act on complaints from the bee industry that some cheap imported honey is mislabelled and does not meet local food standards.

An official said in a Senate hearing last week that the ACCC would make an announcement within weeks.

 ‘Victoria Honey’, imported from Turkey, is one of four products identified by the Australian Honey Bee Industry Council as potentially breaching labelling laws amid claims it isn’t made from honey, The Sydney Morning Herald reports.

According to the industry, more than 200 tonnes of allegedly substandard honey have been imported since complaints were first lodged a couple of years ago.

Following tests in Germany, the industry said results show the products do not contain honey and are most likely corn syrup.

The industry has also told the ACCC that imported products with names like ‘Victoria Honey’ are misleading because consumers might think they come from Australia. They identified another imported honey being sold with a map of Australia on its logo.

Australian Honey Bee Industry Council executive director Trevor Weatherhead became aware of the problem after noticing honey being imported pre-packed for nearly half the cost of what local farmers were getting.

Independent senator Nick Xenophon said consumers were being conned and Australian honey producers robbed of a fair deal.

“The penalties should be much more severe. There should be a warning for importers of products,” he said.

 

Barossa Farm Produce misrepresented ‘Black Pig’ products

The Australian Competition and Consumer Commission (ACCC) have accepted a court enforceable undertaking from Saskia Beer’s Barossa Farm Produce Pty Ltd for false or misleading representations and misleading or deceptive conduct in contravention of the Australian Consumer Law (ACL).

Barossa Farm Produce has acknowledged that representations made on its product labelling, websites, social media, and at a particular cooking class were likely to have contravened sections 18 and 29(1)(a) of the ACL.

Between about 9 December 2010 and 28 May 2013, Barossa Farm Produce made various representations that the pork used in its “The Black-Pig” smallgoods was from heritage Berkshire pigs, or other heritage black pig breeds; and/or free range pigs, when that was not the case.

Black pig breeds, which include Berkshire pigs, are heritage breeds.  Berkshire pork is known for its texture and flavour due to a higher fat-to-meat ratio than white pig breeds, qualities that make Berkshire pork a premium meat product.

Saskia Beer, Barossa Farm Produce’s sole director, also made representations at an Autumnal Cooking Class held at the Maggie Beer Farm Shop in April 2013 that the pork used in “The Black-Pig” smallgoods was from Berkshire or other black pig breeds, when that was not the case.

A statement made on the websites www.saskiabeer.com and www.barossafarmproduce.com that “we know the origin of every animal that makes its way onto the plate” in relation to “The Black-Pig” smallgoods was also misleading, as Barossa Farm Produce did not in fact know the origin of every animal used in those products.

Barossa Farm Produce has provided the ACCC with a court-enforceable undertaking that it will not make any representations:

about the breed or type of pigs used in Black Pig labelled smallgoods, in circumstances where it does not know the breed or type of pigs used; and

that it knows the origin of every animal used in the production of Black Pig labelled smallgoods, in circumstances where it does not know the origin of every animal used.

ACCC chairman Rod Sims said "A business must not make claims about the characteristics of its products when it has no reasonable basis for doing so.”

“Barossa Farm Produce made false or misleading claims that Berkshire, Black, or free range pork was used in its Black Pig products, when this was not the case. This had the potential to give Barossa Farm Produce an unfair advantage in the market, as consumers are likely to seek out and pay more for products containing specialised gourmet ingredients," he said.

As part of the court-enforceable undertaking, Barossa Farm Produce has also acknowledged that it did not have adequate systems in place to verify the breed or type of pig used in “The Black-Pig” smallgoods, undertaken to review its compliance systems to ensure such conduct does not reoccur; and undertaken to publish a corrective notice on its website, and ensure that its current directors attend trade practices compliance training.

 

Jamie Oliver weighs in on Woolworths campaign being funded by growers

The Jamie Oliver Group responded to Ausveg’s plea for support by saying Oliver is concerned, but has no sway with the grocery retailer.

In a letter to Ausveg, the Jamie Oliver Group said “Jamie, naturally, is concerned when he hears about small producers suffering financial hardship and your letter will be discussed with Woolworths further at our next senior-level meeting to ensure farmers are completely clear about the aims of the program”.

“As I'm sure you know, Jamie is essentially an 'employee' of Woolworths and as such he has no sway regarding the commercial direction or negotiations that the Woolworths business takes”.

Ausveg Public Affairs Manager, William Churchill said “Ausveg is disappointed in the lacklustre response from the Jamie Oliver Group for not taking a stronger stand on the issue after AUSVEG exposed Woolworths last week who are levying farmers 40c a crate to pay for their new marketing campaign”.

“This is in stark contrast to the position Mr Oliver took in 2012 where he signed an open letter to The Times objecting to the price of milk. It’s sad that a similar stand has not been made here,” Churchill said. “Growers have seen this levy by Woolworths as a slap in the face and a double dip into their wallets and are rightfully outraged”.

“Woolworths are holding up one grower who has had to negotiate their payments for this ‘voluntary levy’ [and that] gives quite a strong indication that growers involvement is not because they are supportive of the campaign but because they don’t want to threaten their business with the supermarket giant”.

Last week (11 June), Ausveg wrote to Jamie Oliver, requesting that he ask the retailer to give refunds to the farmers who have contributed to the campaign.

 “We have no issue with Mr Oliver, but for Woolworths to ask hard working Australian growers to stump up this additional money is unreasonable, unfair and un-Australian,” Churchill said.

Reports emerged that Woolworths are demanding hundreds of thousands of dollars from individual growers around Australia to fund their new campaign on 6 June after Ausveg held a press conference with Independent South Australian Senator Nick Xenophon to call upon the ACCC to investigate the supermarket.

Ausveg alleges that the funding for the campaign is being collected in the form of a new 40c per crate charge on top of the 2.5 – 5 per cent fee growers are already required to pay Woolworths for them to market and promote their produce.

A statement from Woolworths maintains that the contributions were “entirely voluntary”.

"It’s disappointing that Senator Xenophon and Ausveg didn’t contact us," the statement read.

"We could have explained that the contribution was entirely voluntary, how around half our suppliers chose to work with us on the campaign which benefits the whole fruit and vegetable industry and how participating growers are paying less than 2 per cent of the cost of a case of produce."

 

Who’s funding Woolies’ Jamie Oliver campaign?

VIDEO: This week’s news wrap-up is all about Woolworths' Jamie Oliver campaign, which AusVeg says is being funded by the supermarket giants' growers.

According to the lobby group, Woolworths is hitting producers with a 40 cents per crate charge on top of the up to five percent fee they already pay for promotional activities.

Woolworths denies the claim, however, arguing participation in the campaign is voluntary.

Hear all about it in our latest The Week in Focus video below.

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AUSVEG writes to Jamie Oliver over Woolworths campaign

Following reports last week that supermarket giant Woolworths has been passing the costs of its Jamie Oliver campaign onto Australian growers, AUSVEG has written to the celebrity chef, requesting that he ask the retailer to give refunds to the farmers who have contributed to the campaign.

Late last week, AUSVEG, the peak industry body for vegetable and potato growers, released a statement urging the ACCC to investigate the behaviour of Woolworths who are allegedly seeking enormous contributions from Australia’s horticulturalists to pay for their instore Jamie Oliver campaign.

According to AUSVEG, Woolworths are demanding hundreds of thousands of dollars from individual growers around Australia to fund their new campaign in the form of a new 40c per crate charge on top of the 2.5 – 5 per cent fee growers are already required to pay Woolworths for them to market and promote their produce.

In addition, AUSVEG allege that Australian growers are being given no undertaking from Woolworths on what return they will see from the additional funds they are being asked to provide to fund the promotion.

“We have now taken the step of writing to Mr Oliver to ask that he intervenes and pleads with Woolworths to refund this money to Australian vegetable growers,” said AUSVEG public affairs manager William Churchill.

“We have no issue with Mr Oliver, but for Woolworths to ask hard working Australian growers to stump up this additional money is unreasonable, unfair and un-Australian.”

Churchill says that AUSVEG is not opposed to the campaign per se, but says that the cost should not be at the expense of Australian farmers.

“AUSVEG’s primary concern is that financially-stretched Australian vegetable growers are being unfairly pressured in to contributing to a marketing campaign for a company, which in February posted a $1.32 billion net profit.”

“Clearly this campaign could be funded from Woolworth’s own coffers, without having to further squeeze Aussie growers.”

 

Woolworths demands growers pay for Jamie Oliver campaign

Horticulture body AUSVEG is urgently calling on the ACCC to investigate the behaviour of Woolworths, who are allegedly seeking enormous contributions from Australia’s horticulturalists to pay for their Jamie Oliver campaign.

According to AUSVEG, Woolworths are demanding hundreds of thousands of dollars from individual growers around Australia to fund their new campaign.

The payment is in the form of a new 40c per crate charge on top of the 2.5 – 5 per cent fee growers are already required to pay Woolworths for them to market and promote their produce.

Growers around the country are being given no undertaking from Woolworths on what return they will see from the additional funds they are being asked to provide to fund the promotion.

AUSVEG today held a press conference with Independent South Australian Senator Nick Xenophon, a long-time supporter of the Australian vegetable and potato industries, to expose Woolworths’ behaviour.

“AUSVEG is alarmed at the way that Woolworths is squeezing its suppliers for more cash and are outraged at the way that the company is behaving,” said AUSVEG Acting CEO, William Churchill.

According to AUSVEG, growers around the country are frightened that if they do not comply with these requests to fund the campaign their business with the country’s biggest supermarket will be blacklisted and they will start to receive fewer orders for produce, or be struck out altogether.

“It’s astounding for a company that posted a $1.32 billion net profit in February and employs 190,000 staff to be going back to already squeezed farmers and asking them to cough up more money to pay for promotions,” Churchill said.

“Australia’s farmers cannot afford to fund Woolworths’ marketing campaigns and expectations that growers should contribute more are totally unreasonable. The ACCC must immediately investigate” said Mr Churchill.

A statement from Woolworths said "It’s disappointing that Senator Xenophon and Ausveg didn’t contact us."

"We could have explained that the contribution was entirely voluntary, how around half our suppliers chose to work with us on the campaign which benefits the whole fruit and vegetable industry and how participating growers are paying less than 2 per cent of the cost of a case of produce."

The news comes a month after the ACCC took Coles to Federal Court claiming the supermarket giant broke Consumer Law in conduct in relation to its Active Retail Collaboration (ACR) program.

The ACR program was developed by Coles in 2011 to improve earnings by obtaining better trading terms from its suppliers. It’s alleged one of the ways Coles sought to improve earnings was through the introduction of ongoing rebates to be paid by its suppliers in connection with the Coles ARC program, 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 in relation to 200 of its smaller suppliers, Coles required agreement by the supplier to the rebate 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.  

 

Supermarket supply agreements played major role in Rosella’s collapse: Sarantinos

The receiver of Rosella has said supply agreements with Coles and Woolworths played a major role in the company’s collapse.

The Gourmet Food Group fell into receivership in 2012, less than a year after the ACCC alleges Coles began its ‘Active Retail Collaboration’ program, The Sydney Morning Herald reports.

The ACCC alleges that in relation to 200 of its smaller ‘tier three’ suppliers, Coles required agreement by the supplier to the rebate 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.

The campaign is now part of federal court proceedings against Coles over alleged unconscionable behaviour.

Jim Sarantinos, a partner at Ferrier Hodgson, said the demand of both supermarket chains through rebates greatly contributed to Gourmet Food Group’s financial state.

''Coles and Woolworths had a target they wanted to reach in regards to private label products, which are obviously sold at a significant discount to branded products like Rosella,'' Sarantinos said.

''The problem that Rosella had was that it didn't necessarily have the financial resources to make the changes that were required to counter that move.''

Waterwheel, which was operated by the Gourmet Food Group, is one of the suppliers who were targeted for payments, according to the ACCC’s statement of claim.

A creditor’s report from 2012 says sales from Rosella's branded products fell 16 percent in 2012 ''due to retailer focus on private label products.'' The report also says that sales to major food chains were ''substantially less than budgeted'' due to major retailers ''deleting various product lines in store and delays in launching of new products and focusing on private label products.”

Sarantinos said ''The push from the supermarkets towards private labels and the negotiating power they are able to exert on suppliers certainly had an impact on Rosella's performance.''

''There were still issues in Rosella's business, and it may have been that receivership was inevitable, but [the push by the supermarkets] was certainly a big factor.''

Parts of the Gourmet Food Group’s business have since been sold off. In February last year, Waterwheel Industries was sold to Australian food manufacturer, Green's General Foods. In March 2013, Pitango was purchased by Sydney-based Beak and Johnston.

Rosella was then acquired in April 2013 by Sabrands, with manufacturing at Sabrands’ Yarra Ranges plant. Rosella’s tomato sauce is back in Coles, Woolworths and IGA supermarkets.

 

ACCC signals strategic change in battle with supermarkets

The corporate regulator’s ongoing battle with the major supermarket chains took an interesting twist on Monday when it alleged that Coles had engaged in unconscionable conduct against various small suppliers.

The case relates to Coles’ efforts to improve its efficiency via a major revamp of its supply chain. This led to the Active Retail Collaboration program, which – according to Coles – delivered benefits for large and small suppliers. There’s no such thing as a free lunch though: Coles wanted its suppliers to pay rebates in return for these benefits.

The Australian Competition and Consumer Commission’s (ACCC) case relates to the manner in which Coles sought the suppliers’ agreement to pay the rebates. It is based upon the evidence of 200 small suppliers who were allegedly given “a matter of days” to examine the proposals put forward by Coles. Refusals to pay the rebate were apparently “escalated” to senior Coles staff who threatened “commercial consequences” if the supplier didn’t comply.

On the face of the ACCC’s media statement, the facts upon which the case is based could have been framed as a misuse of market power. The ACCC, however, has made a strategic decision to pursue the claim as unconscionability.

A recent broadening of the law

There are several reasons why it may have done so. First, the ACCC had a significant victory last year when the Full Court found that Lux had engaged in unconscionable conduct when selling vacuum cleaners door-to-door. The unconscionable conduct provisions have been a moving feast ever since their introduction into what is now known as the Competition and Consumer Act. When first inserted, Parliament clearly indicated that the statutory prohibition was not the same as the equitable concept of unconscionability, which is extremely hard to prove.

But many early court decisions seemed to view the statutory prohibition within the framework of the old fashioned equitable approach. In response, Parliament kept amending the legislation, leading to several iterations of the prohibition. But this itself resulted in greater uncertainty about the interpretation of the law. With the Lux case, however, we have superior court interpretation of a provision that has not been amended for more than two years (in the life of statutory unconscionability, that’s practically a record).

While that decision is very fact specific, it clearly broadened the scope of the statutory prohibition, such that the ACCC may feel greater confidence in categorising Coles’ alleged conduct as unconscionability rather than as a misuse of market power.

Time and complexity

Market power cases are notoriously difficult to prosecute: they are long-running, expensive and extremely complex. The ACCC doesn’t have the best track record in relation to such cases and even success can turn out to be a Pyrrhic victory. One of the ACCC’s best misuse of market power success stories is the 2006 Safeway case, in which Safeway (now Woolworths) was fined $8.9 million for unfair conduct towards bread suppliers. That case took nine years from the time of filing to the handing down of final penalties: any benefit for Safeway’s victims had clearly dissipated in the meantime.

Unconscionable conduct cases are much more fact specific and do not involve the complexities of expert economic evidence. Lux for example took around 18 months from filing until the Full Court’s decision.

While the current case is much more complex than Lux (the sheer volume of witnesses will make a significant difference), a first instance decision could be expected by the end of next year. The first directions hearing (on June 6) will be before Justice Michelle Gordon; she runs a fearsomely efficient court room, so an earlier result (if the case stays on her docket) is quite likely.

What would success mean for the ACCC and suppliers?

By framing Coles’ conduct as unconscionable, the ACCC will lose out a little in relation to possible penalties. Maximum fines for misuse of market power are substantially higher – $10 million or more – as opposed to $1.1 million for unconscionability.

But this factor is unlikely to have weighed heavily on the ACCC. First, any such consideration is premised on victory and, as already discussed, unconscionable conduct looks easier to prove right now. In addition, penalties can be imposed per contravention – it’s unclear, at this stage, how many contraventions the ACCC is alleging and how they might be categorised. But it’s unlikely that there would be a maximum penalty of just $1.1 million available to the judge if the ACCC is successful.

In any case, the key outcomes will be damage to Coles’ reputation (which may well result even if the ACCC doesn’t win) and the closer scrutiny of its ongoing conduct. Suppliers, in particular, are likely to be more vocal in complaining about the conduct of Coles and Woolworths if they can see that the ACCC is able to take timely and effective action on their behalf.

To this end, it seems unlikely that Coles will punish the 200 or so suppliers who are caught up in the ACCC’s action. The ACCC has made very clear that much of its evidence was obtained by the use of compulsory powers: as such, it’s hard to tell whether a supplier is a “collaborator” or an unwilling participant.

In any case, Coles would be extremely foolish if it tried to punish suppliers for co-operating with the ACCC while under such a public spotlight. That would look a whole lot like unconscionable conduct.

The Conversation

Alexandra Merrett was a senior enforcement lawyer with the ACCC until July 2012.

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

 

Coles’ incoming boss named by ACCC

The incoming boss of Coles supermarkets, John Durkan, has been named in documents as playing a key role in allegedly mistreating Coles suppliers.

According to the Sydney Morning Herald, Wesfarmers was refusing to comment on the future of Durkan late on Monday, and seems to be standing by him.

Coles may be facing fines up to $200 million in the claim lodged by the ACCC with the federal court, where Durkan is placed at the centre of an ''orchestrated and organised'' campaign to pump up Coles pre-tax earnings by as much as $30 million.

The campaign allegedly demanded payments from tier 3 suppliers as a rebate for the supermarket group improving its supply chain.

ACCC chairman Rod Sims said the extent of the demands and alleged unconscionable conduct by Coles surprised even him.

''I think it's fair to say the allegations we have made amount to more than we thought we would find,'' Sims said on Monday.

''We have very much treated this as being an organised and orchestrated campaign by Coles.''

It is alleged Durkan, who will take the reins in July, approved a plan to demand payments from 200 suppliers as part of Coles' Active Retail Collaboration program in 2011.

The ACCC claims in its court documents that Durkan had no reasonable basis for telling suppliers the rebates reflected the value of the supply chain changes. In fact no details on how the payment figure was reached were provided.

 

ACCC takes action against Coles for alleged unconscionable conduct

The ACCC has instituted proceedings in the Federal Court of Australia against Coles alleging that the supermarket giant broke Australian Consumer Law in conduct in relation to its Active Retail Collaboration (ACR) program.

The ACR program was developed by Coles in 2011 to improve earnings by obtaining better trading terms from its suppliers. It’s alleged one of the ways Coles sought to improve earnings was through the introduction of ongoing rebates to be paid by its suppliers in connection with the Coles ARC program, 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 in relation to 200 of its smaller suppliers, Coles required agreement by the supplier to the rebate 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.  The ACCC alleges that, in a number of cases, threats were made when suppliers declined to agree to pay the rebate.

The ACCC alleges that Coles took part in the following conduct:

  • 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 program to their small business.

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

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

These proceedings arise from a broader continuing investigation by the ACCC into allegations that supermarket suppliers were being treated inappropriately by the major supermarket chains.

The Australian Food and Grocery Council (AFGC) welcomed the announcement of the proceedings.

AFGC CEO Gary Dawson said the proceedings involve very serious matters in relation to retailer dealings with food and grocery suppliers that have been hanging over the industry for years.

“It is important that these allegations be tested in court because they go to the heart of whether we have a properly functioning food and grocery market in Australia under the current market power imbalance,” Dawson said.

“Consumer interest is best served by a properly functioning competitive market and the ACCC has a key role in ensuring fair and effective competition across the supply chain.”

“Today’s announcement underlines the importance of an effective Industry Code of Conduct which will deliver more contractual certainty, encourage better sharing of risk and provide a practical dispute resolution mechanism without excessive regulation or compliance costs.”

“It also underlines the significance of the current Competition Law Review which will examine the impact of vertical integration and market power in key industry sectors, including supermarket retailing,” Dawson said.

In a statement Coles says it will vigorously defend the allegations, ABC Rural reports.

Coles said it's committed to negotiating fairly and working collaboratively with its suppliers, to help them grow. The supermarket said it's building strong relationships with its supplier partners "to grow a resilient and competitive grocery manufacturing industry in Australia."

In April, Coles published corrective advertisements on media platforms after the ‘Our Coles Brand Milk Story’ video stated that the farmgate milk price had increased to 90 cents when they had in fact decreased to 84 cents.

The corrections were published after the ACCC accepted an enforceable undertaking on the matter.

Coles admitted that its actions would be likely to have contravened section 18 of the Australian Consumer Law, (which prohibits misleading or deceptive conduct).