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).