ACCC takes action against Woolworths over alleged unconscionable conduct towards suppliers
The Australian Competition and Consumer Commission (ACCC) has initiated proceedings in the Federal Court against Woolworths alleging unconscionable conduct in dealing with a large number of its suppliers.
The ACCC is alleging that the supermarket acted in contravention to Australian Consumer Law in December 2014 when its senior management developed a strategy aimed at reducing its half year gross profit shortfall by 31 December 2014.
To do this the ACCC is alleging that Woolworths’ strategy, referred to as “Mind the Gap” saw the supermarket ask for payments from a group of 821 “Tier B” suppliers. The ACCC alleges that these suppliers were asked to pay amounts ranging from AUD$4, 291 to AUD$1.4 million to “support” Woolworths.
The ACCC further alleges that the request for payment were made under circumstances where Woolworths was in a substantially stronger bargaining position than the suppliers and that Woolworths did not have a pre-existing contractual entitlement to seek the payments.
“The ACCC alleges that Woolworths’ conduct in requesting the Mind the Gap payments was unconscionable in all the circumstances,” ACCC Chairman Rod Sims said.
“A common concern raised by suppliers relates to arbitrary claims for payments outside of trading terms by major supermarket retailers. It is difficult for suppliers to plan and budget for the operation of their businesses if they are subject to such ad hoc requests,” said Sims.
“The alleged conduct by Woolworths came to the ACCC’s attention around the time when there was considerable publicity about the impending resolution of the ACCC’s Federal Court proceedings against Coles Supermarkets for engaging in unconscionable conduct against its suppliers,” Sims said.
In July 2015, Coles was ordered to refund $12 million to suppliers.
“Of course, the allegations against Woolworths are separate and distinct from the Coles case,” Sims said.
Woolworths has responded to the ACCC’s allegations with the following statement:
“This afternoon the ACCC advised Woolworths it had filed proceedings in the Federal Court in regard to supplier relations.
We are reviewing the ACCC claims. Woolworths has been fully cooperating with the ACCC during the course of the investigation over the last year. We believe our conduct was consistent with Australian and international industry practice to engage regularly with suppliers over product and category performance.
Woolworths believes in working cooperatively with suppliers. Woolworths was the first major supermarket to agree to sign the Grocery Code of Conduct and is currently implementing the Code across its business.
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