The competition watchdog has instituted proceedings in the Federal Court against Coles over alleged "unconscionable conduct" towards 200 of its smaller suppliers, which the ACCC claims breached Australian Consumer Law.
The latest action, part of the Australian Competition and Consumer Commission's ongoing broader investigation into the treatment of suppliers by the major supermarket chains, relates to Coles' Active Retail Collaboration program.
The ARC program required ongoing rebates to be paid by suppliers "based on purported benefits to large and small suppliers that Coles asserted had resulted from changes Coles had made to its supply chain".
The ACCC alleges that in 2011, Coles bullied smaller suppliers as part of a strategy to improve its earnings by obtaining better trading terms. Coles' target was to obtain $16 million in ARC rebates from smaller suppliers.
The ACCC claims that Coles required suppliers to agree to the rebate "within a matter of days" and if suppliers declined to pay, "Coles personnel were instructed to escalate the matter to more senior staff, and to threaten commercial consequences if the supplier did not agree" and that "threats were made" in a number of cases when suppliers declined to pay the rebate.
ACCC chairman Rod Sims said: "The conduct of Coles alleged by the ACCC in these proceedings was capable of causing significant detriment to small suppliers’ businesses. This could have resulted in these businesses becoming less able to plan and less able to innovate in the market, with resulting reduced economic efficiency and consumer detriment.
"When we called for market participants to provide information to the ACCC on a confidential basis to assist the ACCC’s investigation, I committed that the ACCC would seek to maintain that confidentiality. In accordance with that commitment, the documents and information relied on by the ACCC in these proceedings were obtained by use of the ACCC’s compulsory statutory information gathering powers in a subsequent phase of the investigation."
The competition watchdog is seeking pecuniary penalties, declarations, injunctions and costs.
Coles said it will “vigorously defend the allegations” made against it by the ACCC adding that it has worked to improve relationships with suppliers over the last five years.
In a statement the supermarket said: "Coles is totally committed to negotiating fairly and working collaboratively with its suppliers, providing opportunities for suppliers to grow; this has been integral to Coles’ turnaround strategy from the start.
“Coles proactively seeks to build strong relationships with its supplier partners, supporting the growth of a resilient and competitive grocery manufacturing industry in Australia. In fact, Coles’ support for Australian food manufacturing has never been stronger.”
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