Woolworths has won a two-year legal battle brought against it by the ACCC after claims it engaged in “unconscionable conduct” pressuring suppliers to pay a stipend to cover gross profit shortfalls.
The 'Mind the Gap' scheme was brought in in 2014, and asked suppliers to pay Woolworths between $4,291 and $1.4 million. The ACCC's concern was that Woolworths bargaining power was stronger than that of the suppliers. The fear in such circumstances is that a retailer could feasibly de-list a supplier for not showing support.
The Federal Court today dismissed the case and ruled that requesting these payments from suppliers was “not unconscionable within the meaning of the Australian Consumer Law”.
The complexity and constantly evolving nature of Woolworths relationships with suppliers was noted by Justice Yates.
“The ACCC took this action because we considered that Woolworths’ behaviour went well beyond hard commercial bargaining and is not consistent with business and community values. If you’re a supplier subject to arbitrary demands, it’s very hard to make future investment decisions in the face of financial uncertainty,” ACCC Chairman Rod Sims said.
“The ACCC will carefully consider the judgment. Pursuing unconscionable conduct remains an important area for the ACCC and we will continue to take enforcement action where appropriate, particularly in relation to supply chain issues.”
Category managers and buyers contacted suppliers to request the urgent payments with many at the time suggesting if the payments were not received, it would be viewed as a lack of support.
Woolworths was looking to plug a $60 million hole in its profit, and that around It is believed that $18.1m was recovered from suppliers. The ACCC was seeking funds to be returned to suppliers.
At the time ACCC chairman Rod Simms, said: “A common concern raised by suppliers relates to arbitrary claims for payments outside of trading terms by major supermarket retailers. It is difficult for suppliers to plan and budget for the operation of their businesses if they are subject to such ad hoc requests.”
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