Coles ordered to refund over $12 million to suppliers

Independent arbiter the Hon Mr Jeff Kennett AC has instructed Coles to refund over $12 million to small food and grocery suppliers who were forced to pay extra rebates to join a supply chain program, or who were fined for offences such as late deliveries and spoilage in Coles stores.

The $12.3 million in refunds and compensation is in addition to a $10 million penalty Coles was ordered to pay by the Federal Court last December for “serious, deliberate and repeated” misconduct towards suppliers.

At the end of 2011, Coles introduced the Active Retail Collaboration (ARC) program, claiming that sharing data relating to future demand for goods, and promotional activities would reduce supply chain costs.

However, the Australian Competition & Consumer Commission (ACCC) accused Coles of setting out to improve its earnings by demanding that small suppliers pay ongoing and ­additional rebates to cover the cost of the new program. When suppliers refused to pay the extra rebates, which ranged from 0.1% to 0.7% of sales, they were ­threatened with commercial ­ramifications such as range reviews.

Kennett has allowed suppliers to exit the ARC program without penalty or have their ARC contribution rebates reviewed, which will result in further substantial ongoing savings for Coles’ suppliers.

“The arbitration process conducted by Mr Kennett has proven both extremely timely and effective with significant benefits to suppliers,” ACCC Chairman Rod Sims said.

“The process will also deliver flow-on effects for suppliers more broadly as a result of changes Mr Kennett says Coles has begun to implement that affect the way it deals with its suppliers.

“The arbitration process was intended to provide an efficient alternative to otherwise lengthy and costly processes in determining the loss and damage of affected suppliers,” Sims said.

Kennett’s determinations, as the independent arbiter, are binding on Coles. Kennett also made a number of non-binding recommendations to Coles on the basis of his discussions with some suppliers.

Coles has advised the ACCC that it intends to become a signatory to the Food and Grocery Code from 1 July 2015. The introduction of an effective and equitable dispute resolution process for disputes arising between retailers or wholesalers and suppliers is a key feature of the code.