Kennett’s arbitration forces Coles to refund its suppliers

Posted by AFN Staff Writers on 1st July 2015

accc-logoAction by the Australian Competition and Consumer Commission (ACCC) has led to a refund by Coles of  $12 million to the supermarket’s suppliers.

The ACCC welcomed the news from independent arbitrator, the Hon. Mr Jeff Kennett AC (a former premier of Victoria) whose decision also allows suppliers to exit Coles’ “Active-Retail-Collaboration” (ARC) or to have their ARC contribution rebates reviewed.

This move is expected to provide substantial savings for the suppliers.

“The arbitration process conducted by Mr Kennett has proven both extremely timely and effective with significant benefits to suppliers,” ACCC Chairman Rod Sims said.

“The process will also deliver flow on effects for suppliers more broadly as a result of changes Mr Kennett says Coles has begun to implement that affect the way it deals with its suppliers.”

The refunds come from two proceedings conducted by the ACCC in 2014, known as the ‘ARC proceedings’ and the ‘claims proceedings’ respectively.

As a result of the proceedings, the Federal Court of Australia found in both cases that Coles had engaged in “unconscionable” conduct when dealing with some suppliers in 2011.

To help deal with the matter Cole set up a process which would provide redress options for impacted suppliers.

Mr Kennett was appointed in December 2014 to administer and to oversee the process including eligibility for supplier refunds.

“The high level feedback from suppliers is that they are largely satisfied with access to redress from Coles and the timely, efficient and low cost approach. Ultimately, it was a matter for each supplier to decide whether or not to proceed with the resolution proposed, and as Mr Kennett’s report demonstrates, a very large number accepted the relief offered by Coles,” Mr Sims said.

“The arbitration process was intended to provide an efficient alternative to otherwise lengthy and costly processes in determining the loss and damage of affected suppliers.  Mr Kennett has now finalised his deliberations and has instructed Coles to refund over $12 million to a number of ‘Tier 3’ suppliers and a further $324,000 to suppliers listed in the claims proceedings. This is in addition to the penalty ordered by the court of $10 million,” Mr Sims said.

“Mr Kennett has reported that his arbitration process has resulted in substantial ongoing savings for suppliers. Exit from the program chosen by some suppliers and reduced rates for others will save suppliers significant additional costs into the future,” Mr Sims said.

Coles’ response

Coles has said that it accepts and respects the result from the arbitration dealings.

The supermarket has thanked Mr Kennett and said that the supermarket will keep working with him in his position as an independent arbitrator.

The ACCC also acknowledged Coles’ co-operation in the matters.