Coles Pays Penalty for Small Supplier Bullying
Wednesday 17 December 2014 @ 9.39 a.m. | Trade & Commerce
The supermarket giant Coles has agreed to pay a $10 million penalty to resolve its ongoing court battles with the Australian Competition and Consumer Commission (ACCC), admitting it pressured small suppliers to pay ongoing rebates.
Background
The ACCC commenced proceedings on 5 May 2014 (first proceedings) and 16 October 2014 (second proceedings) against Coles Supermarkets Australia Pty Ltd and Grocery Holdings Pty Ltd (together, Coles).
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.
Coles admits to unconscionable conduct
After “categorically” denying the allegations in July, Coles released a statement on 15 December 2014, admitting to two separate cases of unconscionable conduct towards its suppliers in late 2010 and 2011.
The Managing Director of Coles, John Durkan said that:
“… Coles unconditionally apologises and accepts full responsibility for its actions in these supplier dealings … I believe that in these dealings with suppliers, Coles crossed the line and regrettably treated these suppliers in a manner inconsistent with acceptable business practice. We will await the Judge's decision in these matters.”
Agreement reached with the ACCC
The supermarket reached an agreement with the ACCC to pay a proposed penalty of $10 million, although the amount is still to be reviewed and cleared by the Federal Court in Melbourne. An admission of guilt was also part of the orders sought by the ACCC.
In July 2014, Coles lodged a 34-page court defence of its ARC program, which asked around 200 suppliers for additional and ongoing rebates. The ACCC alleged that Coles' target was to obtain $16 million from suppliers from this rebate. Coles had maintained participation to the program was at all times voluntary.
It admitted that “at times” during the negotiations of the ARC program, it “fell considerably short” of its best practice business standards and “the reasonable expectations of suppliers”.
Coles also commented:
“Coles has identified with the ACCC, dealings with a number of suppliers where its conduct was unacceptable and has made a number of admissions … In these particular dealings, Coles was not respectful of supplier needs for full and timely transparency, and of the responsibility attached to Coles’ bargaining power.”
Coles said it has addressed this imbalance with the appointment of former Victorian Premier Jeff Kennett as an independent arbiter of its supplier dealings.
Further Admission from Coles
The grocery giant also admitted to unconscionable conduct in regards to its communications and negotiations with five suppliers over late delivery, waste and profit gaps.
Peter Strong, executive director of the Council of Small Business of Australia (COSBOA), said the settlement was good news for small suppliers. Strong says he hopes the penalty will lead to a change in the standard of conduct towards small suppliers:
“This is what we’ve known for a long time. There has been at least a decade of this behaviour by Coles, but also others.
Sure, they’ll pay the fine, but will they change? Admitting is good, but they need to do something about it, something real.
They are a big organisation, so they need to bring in a system that sends the message out to all their people.”
Strong says COSBOA will endeavour to meet with Richard Goyder, head of Coles’ parent company Wesfarmers, to offer its assistance to set up such systems.
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Sources:
We “crossed the line”: Coles coughs up $10 million and an apology over supplier bullying allegations – Article from smartcompany.com.au
ACCC and Coles seek consent orders to resolve unconscionable conduct proceedings –
ACCC Release MR 308/14
