Coles admits unconscionable conduct, set to settle with ACCC
Australian supermarket Coles is set to refund payments made by certain suppliers, after the supermarket group admitted it engaged in unconscionable conduct when dealing with certain suppliers in 2011.
The Australian Competition and Consumer Commission (ACCC) and Coles will today make joint submissions to the Federal Court of Australia seeking orders from the Court, after agreeing to resolve the two separate proceedings instituted by the ACCC alleging unconscionable conduct by Coles when dealing with certain suppliers in 2011.
The parties will seek consent orders from Justice Gordon, including:
- declarations, based on admissions by Coles, that Coles engaged in unconscionable conduct with respect to a number of suppliers in 2011, in contravention of the Australian Consumer Law (ACL); and
- pecuniary penalties.
The parties will also advise the Court that, as part of the resolution of the proceedings, Coles will give an enforceable undertaking to the ACCC which provides for an independent review of the eligibility of suppliers referred to in both proceedings for possible refund of certain payments made to Coles by those suppliers.
It is a matter for the Court as to whether it is prepared to make the consent orders sought by the parties.
As the matter is before the Court, the ACCC said it would not be making further comment until the Court hands down its decision.
The first proceedings alleged that Coles had engaged in unconscionable conduct by the way it sought rebates from suppliers under its “Active Retail Collaboration” (ARC) program.
The second proceedings alleged that Coles had engaged in unconscionable conduct against certain suppliers in relation to claims for various payments, including payments for purported profit gaps, waste and markdowns, and late and short deliveries.
In October 2014, Australian Food News reported that Coles had said it would resist moves by the ACCC to merge into a single court action the two unconscionable conduct court cases launched against the supermarket by the ACCC.
Chronology of the ACCC’s investigation
Media reports indicated that supermarket suppliers were being treated inappropriately by the major supermarket chains.
November 2011 – February 2012
The ACCC sought information from market participants about these concerns. But it became clear that suppliers were reluctant to speak to the ACCC for fear of what they perceived may be the consequences of providing information to the ACCC.
The ACCC Chairman called on suppliers to provide information to the ACCC on a confidential basis, on the basis that the ACCC would seek to protect and maintain that confidentiality.
The ACCC said the call from its Chairman in February 2012 resulted in around 50 market participants approaching the ACCC on a confidential basis to discuss practices by the major supermarket chains that they were concerned about. Having identified areas of concern, the ACCC then commenced an in-depth investigation into those issues.
June 2012 – December 2013
Extensive in-depth investigation using compulsory information gathering powers that required suppliers and Coles to provide information.
13 February 2013
The ACCC provided an update to the Senate Estimates Committee of its investigations. The ACCC advised that the allegations raised with the ACCC, which were the subject of its investigation, included allegations of some conduct that the ACCC considered did not conform to acceptable business practice and may be unconscionable or a misuse of market power.
Such conduct, which was not necessarily identical across suppliers, product lines or even supermarkets, included:
- persistent demands for additional payments from suppliers, above and beyond that negotiated in their terms of trade;
- the imposition on suppliers of penalties that did not form part of any negotiated terms of trade, and which apparently do not relate to actual costs incurred by the major supermarket chains as a result of the conduct which has led to the penalty being imposed;
- threats to remove products from supermarket shelves or otherwise disadvantage suppliers if claims for extra payments or penalties are not paid;
- failure to pay prices agreed with suppliers; and
- conduct discriminating in favour of home brand products.
The ACCC initiates proceedings against Coles in the Federal Court, alleging that Coles had engaged in unconscionable conduct as part of its Active Retail Collaboration (ARC) program, in contravention of the Australian Consumer Law (ACL).
The ACCC initiates further action against Coles, with new allegations relating to Coles’ everyday interactions with its suppliers. Coles releases a statement saying it rejected the claims of unconscionable conduct as alleged by the ACCC.
Coles admits it engaged in unconscionable conduct and seeks to settle with the ACCC.