ACCC investigates allegations against Woolworths and Coles over their treatment of suppliers

John Rolfe
February 18, 2013
News Limited Network

THE ACCC’s investigation into Woolworths and Coles includes probing allegations of “cliffing”, where suppliers are given an ultimatum – agree to tougher terms or be pushed off the shelf.

It’s believed the Australian Competition and Consumer Commission is also testing claims that space is being auctioned off, that up-front payments are being demanded for participation in supply-chain schemes of questionable benefit to manufacturers, and that supermarkets have been punishing suppliers who don’t fall into line by cancelling agreed in-store promotion at the last minute.

The ACCC most recently examined the grocery sector in 2008. Then chairman Graeme Samuel found no evidence of misuse of market power. Of packaged groceries, his report said buyer power “may adversely affect individual competitors. However, the role of the ACCC is to consider competition, not individual competitors”.

Two sources who have had high-level dealings with Mr Samuel and his successor, Rod Sims, say the current chief is more determined to interrogate claims of misuse of power and unconscionable conduct.

To that end, in March 2012 Mr Sims took the unprecedented step of revealing the ACCC was prepared to speak to suppliers confidentially. This decision came after the Commission had received from the supplier lobby group, the Australian Food and Grocery Council, a three-page document of unsourced allegations – including of cliffing – that, while concerning, could not be used to take action against the supermarkets.

Before making the offer of confidentiality, the ACCC also received information from the office of the then Industry Minister Kim Carr, who it’s understood tasked a team of staff with interviewing suppliers. Senator Carr would not comment yesterday.

Last week Mr Sims told a Senate hearing that in response to his offer of confidentiality, 50 suppliers came forward, making claims including “persistent demands” for additional payments, being hit with “penalties” unrelated to anything they had done wrong, and “threats to remove products from supermarket shelves if claims for extra payments or penalties are not paid”.

Mr Sims told the Senate hearing the ACCC would now use its “compulsory information powers” to gather evidence from some of the 50 – and other suppliers – to determine if the supermarket chains have a legal case to answer.

Richard Goyder, managing director of Coles’s owner, Wesfarmers, said: “We do not believe there are any systematic issues in Coles and we have robust policies in place internally that outline expected behaviours and regularly reinforce them.”

A Woolworths spokeswoman said it had a “very strong focus on ensuring its business dealings are fair and lawful, while delivering low prices for our customers”.

The ACCC yesterday said it was unable to provide further comment on its investigation.