ACCC takes action against Coles for "unconscionable conduct"

The Australian Competition and Consumer Commission (ACCC) is taking action against Coles for alleged “unconscionable conduct” towards its suppliers.

The ACCC has alleged that Coles threatened “commercial consequences” if suppliers refused to pay a rebate that was “based on purported benefits … that Coles asserted had resulted from changes Coles had made to its supply chain”.

In addition, the ACCC claims that Coles took advantage of its bargaining position to seek payments that it had no legitimate basis to seek and did not give suppliers sufficient time to assess whether the supposed benefits of the ARC program gave them any value. Coles is also alleged to have used “undue influence and unfair tactics against suppliers to obtain payments of the rebate”.

“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,” ACCC Chairman Rod Sims said.

“The ACCC alleges that Coles used undue pressure and unfair tactics in negotiating with suppliers, provided misleading information and took advantage of its superior bargaining position, so that its overall conduct was in all the circumstances unconscionable. If this conduct is established in court, the ACCC expects that the community will share the ACCC’s view that business should not be conducted in this way in Australia.”

The Australian Food and Grocery Council (AFGC) has welcomed the ACCC’s action against Coles.

“It is important that these allegations be tested in court because they go to the heart of whether we have a properly functioning food and grocery market in Australia under the current market power imbalance,” said AFGC CEO Gary Dawson.

“[The] announcement underlines the importance of an effective industry code of conduct which will deliver more contractual certainty, encourage better sharing of risk and provide a practical dispute resolution mechanism without excessive regulation or compliance costs.

“It also underlines the significance of the current Competition Law Review which will examine the impact of vertical integration and market power in key industry sectors, including supermarket retailing.”