Natasha Bita
The Australian
February 06, 2012
AUSTRALIA’s competition tsar is promising a shield of secrecy for farmers and grocery suppliers who blow the whistle on retailers abusing their market power to demand cheaper prices.
As the supermarkets step up their long-running price war, Australian Competition & Consumer Commission chairman Rod Sims yesterday admitted the regulator was having “trouble” launching prosecutions because suppliers were too “scared” to give evidence against big retailers.
“Some of the behaviour that supplier organisations and others have alleged, if true, would amount to unconscionable conduct,” he told The Australian.
“We’ve been urging suppliers to give us some evidence to take things forward (in a prosecution), but we’ve been having trouble getting that.
“Too many of them are scared. At the moment all we’ve got is third-party hearsay.”
He said the ACCC urged suppliers to talk confidentially.
“We will protect your identity if you come forward,” he said.
Mr Sims welcomed action by Australia’s biggest retail group, Wesfarmers, in instructing its wholesale buyers not to “bully” suppliers in price negotiations, to avoid prosecution for unconscionable conduct and million-dollar fines.
But he said it was “unfortunate” the Coles buying team had to be told what was legal. “If they were thoroughly confident that the organisation wasn’t running any significant risk of that sort of behaviour I doubt that (memo) would be coming out,” he said.
A Wesfarmers spokesman yesterday rejected Mr Sim’s claim, saying the legal memo had been sent as a “preventative measure”, and was “absolutely not” a directive to rectify behaviour.
The memo to buyers from Wesfarmers’ corporate solicitors’ office warns that the ACCC is “watching” the way supermarkets deal with suppliers.
“Hard, tough and competitive negotiating to drive a bargain and obtain the best deal for Coles is fine,” the letter, obtained by The Australian, states.
“Unfair, unreasonable, bullying, threatening or unethical supplier dealings are unacceptable.”
The “compliance fact sheet” explains that unconscionable conduct can attract fines of up to $1.1m for companies and $220,000 for individuals, force Coles to pay compensation or change its contracts and attract “highly negative publicity”.
“Any investigation of unconscionable conduct is likely to result in the business being compelled to produce significant amounts of internal documentation to the ACCC for examination (including correspondence with suppliers, internal and confidential emails, strategy documents etc),” it says.
Wesfarmers owns Coles, Kmart, Bi-Lo, Officeworks, Target, Bunnings and Liquorland but the memo appears directed at Coles buyers.
It is dated last October, the month Mr Sims declared he would pay “close attention” to Coles and rival Woolworths to ensure they did not use their vast market power to unfairly demand lower prices from suppliers.
His warning came after Target demanded that its suppliers cut their prices by 5 per cent for all orders in the lead-up to Christmas.
The Wesfarmers spokesman said the memo had been “very preventative”. “Coles just wants to make sure all of its buyers are aware of the expected compliance,” he said. “It wasn’t because there’s been unconscionable conduct by Coles buyers.”
Australian Food and Grocery Council chief executive Kate Carnell yesterday called on the federal government to set up a supermarket ombudsman to oversee a new “code of fair trading” to protect suppliers.
She said Coles and Woolworths shared 80 per cent of the food retailing market and suppliers feared “retaliation” if they went to the ACCC.
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