Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405

Friday 9 January 2015 @ 10.49 a.m. | Trade & Commerce

The Federal Court has handed down its declaration in the case of Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405. By consent of the parties, the court found that Coles Supermarkets Australia Pty Ltd had engaged in unconscionable conduct in 2011 with regards to its dealings with certain suppliers. The supermarket giant and the Australian Competition and Consumer Commission (ACCC) had earlier come to an agreed $10 million worth of penalties over the supplier mistreatment.

Background

Earlier, the ACCC launched two court cases alleging that Coles misled suppliers and used undue pressure to extract rebate payments from them. It was alleged that the supermarket’s Active Retail Collaboration (ARC) program attempted to force 200 suppliers to pay the rebates in relation to apparent supply chain improvements.

ACCC further accused Coles of attempting to obtain $16 million in ARC rebates from smaller suppliers and was ultimately seeking an ongoing ARC rebate. Since the ACCC instigated these cases, the two parties have appeared before the Federal Court seeking a consent order on a settlement reached between them. The consent orders would include admissions by Coles that it engaged in unconscionable conduct with respect to the suppliers in 2011.

Judgment of Justice Gordon

In her judgment, Justice Gordon was particularly critical of Coles’ behaviour. She described it as a ‘serious, deliberate and repeated’ breach of Australian Consumer Laws that was contrary to conscience. She classified Coles’ behaviour as one deserving of severe penalty. She added that but for Coles making the admissions it has now made and acknowledging the gravity of its contravening conduct, the conduct and circumstances in which it was committed would have warranted imposing penalties at or close to the maximum the law permits.

Aftermath

ACCC Chairman Rod Sims describes the decision as one that is significant to the development of Australian law. He says indeed it is one of the first findings of unconscionable conduct in a business-to- business context under the Australian Consumer Law. He explains that the most important part of the decision is the signal it would send to larger businesses generally about the appropriate business conduct in commercial dealings with smaller suppliers.

“The Court decision provides a clear indication of the types of conduct that are unacceptable in commercial transactions, and gives guidance as to the standards to which businesses should conform in their dealings with other businesses, and indeed, all consumers.”

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