Coles rejects unconscionable conduct allegations

Sue Mitchell
June 30, 2014
The Age
Supermarket chain Coles has categorically rejected Australian Competition and Consumer Commission allegations that it engaged in unconscionable conduct to force smaller grocery suppliers to pay additional rebates to fund a new supply chain program.
In a 34-page defence filed in the Federal Court in Melbourne on Monday, lawyers for Coles rejected key claims by the ACCC, which launched legal action in May, alleging that Coles used unfair tactics and misleading information to force about 200 suppliers to pay additional and ongoing rebates to participate in the program known as Active Retail Collaboration.
Coles said supplier participation in the ARC program was at all times voluntary and that it consulted with smaller suppliers about the value of expected benefits from the program.
Coles also denied that it threatened to remove recalcitrant suppliers from the shelves, claiming it maintained trading relationships irrespective of whether or not suppliers agreed to participate in the program.
While 32 of the 200 suppliers did not agree to participate in the program, Coles continued to have a trading relationship with each of them.
“Coles at all times was committed to working collaboratively and in good faith with suppliers in relation to the ARC program,” it said.
The ACCC has alleged Coles provided misleading information to suppliers about the savings and the value from the program and used influence and unfair tactics to obtain payments.
Coles required suppliers to pay the rebate within days and if they declined, staff were told to escalate the matter to more senior staff and were threatened with “commercial consequences”, such as being forced off shelves or banned from pro­motions, if suppliers refused to play ball.
The rebates ranged from about 0.7 per cent to more than 1 per cent of sales, depending on the supplier.
The ACCC also alleges that Coles took advantage of its superior bargaining position by seeking payments when it had no legitimate basis to do so, and requiring suppliers to agree to the ongoing ARC payments without providing them with enough time to assess the value of the benefits.
Coles provided category managers with training, manuals and scripts – including threats to delete suppliers who refused to pay up – and awarded prizes to category managers who collected payments.
In its defence, Coles agreed to some of the facts in the ACCC’s statement of claim, including the involvement of management consulting firm BCG and key executives in the program.
However it denied that it hired BCG to develop strategies to help Coles improve its earnings, saying the aim of ARC was to improve the availability of and quality products.
Coles admitted that BCG proposed that Coles ask “tail” suppliers for a “standard 1 per cent” of sales to reflect the sharing of benefits from ARC and that BCG estimated the total “ask” from smaller suppliers would initially be about $30 million. However, it denied “threatening or considering whether to threaten” small suppliers with commercial consequences if they did not agree to pay.
Suppliers have welcomed the ACCC’s action, saying retailers’ heavy-handed tactics have been the bane of their lives for years. But some of those named in the claim or those who may have to give evidence in court fear retribution.
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