The federal court has rubber stamped $10 million in penalties in relation to unconscionable conduct by Coles towards its suppliers.
The legal actions, instituted by the Australian Competition and Consumer Commission (ACCC), related to the supermarket’s conduct in late 2010 and 2011. One related to the rebates Coles sought to fund the Active Retail Collaboration (ARC) supply chain program.
The other related to claims for various payments such as profit gaps, waste and markdowns, damage to products and profitability of products.
Coles will also enter a court enforceable undertaking to the ACCC to establish a formal process to provide options for redress for over 200 suppliers referred to in the proceedings.
In her judgment, Justice Gordon said Coles’ misconduct was “serious, deliberate and repeated”.
“Coles demanded payments from suppliers to which it was not entitled by threatening harm to the suppliers that did not comply with the demand. Coles withheld money from suppliers it had no right to withhold.
“Coles’ practices, demands and threats were deliberate, orchestrated and relentless.”
ACCC Chairman Rod Sims said: “This is a very significant outcome for the supermarket sector and the business community in general. Indeed this is one of the first findings of unconscionable conduct in a business-to-business context under the Australian Consumer Law.
Though Coles initially denied the allegations and vowed to oppose them, the company’s managing director, John Durkan, apologised for its conduct last week, when the $10m settlement was announced.
“Coles unconditionally apologises and accepts full responsibility for its actions in these supplier dealings,” he said.
Fairfax Media also recently reported that Woolworths is seeking $70 million from suppliers by the end of the year in order to meet profit guidance.
Fairfax Media says it has obtained documents that reveal efforts by the retailer to seek extra payment from suppliers to fund the "gap between sales and profit growth" on products it has discounted as part of its "Cheap Cheap" marketing campaign.
According to Fairfax Media, the ACCC is now examining the claims, and Woolworths has "categorically" rejected any suggestion it was acting "unconscionably".
