Jeff Kennett says supermarket system will be fairer after ACCC action against Coles

Sue Mitchell
January 28, 2015
The Age

Coles admitted in December that it had engaged in unconscionable conduct and was fined $10 million.
Former Victorian premier Jeff Kennett has flagged an era of simpler and fairer dealings between the major supermarket chains and grocery suppliers in the wake of the Australian Competition and Consumer Commission’s legal action against Coles for unconscionable conduct.
Mr Kennett says unfair practices such as retailers forcing suppliers to pay for the cost of wastage and theft in stores will come to an end as a result of Coles’ undertakings to the ACCC and the Federal Court and the establishment of a Coles supplier charter and a grocery industry code of conduct.
Mr Kennett was appointed last August as an independent arbiter to resolve ongoing disputes between Coles and its suppliers.
Former Victorian premier Jeff Kennett was appointed last August as an independent arbiter.
Former Victorian premier Jeff Kennett was appointed last August as an independent arbiter. Photo: Jesse Marlow.
When Coles settled the ACCC’s unconscionable conduct claims last month, admitting that it had ‘crossed the line’ and offering to compensate suppliers, Mr Kennett agreed to step in between Coles and suppliers seeking recompense for rebates, fines and payments withheld by the retailer.
“Once it’s all washed up, we’re going to end up with a better system,” Mr Kennett told Fairfax Media on Tuesday.
“I’ve already identified some recommendations that will lead to better process … [and] a lot of changes have already taken place.
“And we now have the grocery code which will also take up some of the issues I’ve identified.”
Several suppliers have already received compensation from Coles as part of the dispute resolution procedures under the supplier charter.
Mr Kennett declined to identify the suppliers or the amount of compensation they received, while Coles declined to comment, referring inquiries back to Mr Kennett.
Mr Kennett said the successful claims involved suppliers who were unfairly penalised for wastage or theft in Coles stores and suppliers who had supply agreements cancelled shortly before products reached stores.
“For the majority of small businesses, that behaviour is just horrendous,” he said.
“I have in the main settled in favour of suppliers and passed my findings onto Coles, with any observations I’ve drawn from settling the matter, if it can lead to better practice.
“Coles have accepted without argument my findings and they’ve paid the suppliers within days.
“The process is working better than I thought and I have found Coles to be very accepting of the conditions I put in place before I took the job.”
Mr Kennett has also written to more than 220 suppliers named in the ACCC’s first unconscionable conduct action against Coles and another five named in the second case, outlining the terms of the court-enforceable undertakings and the offer of compensation.
According to the ACCC, Coles set out to improve its earnings by demanding small suppliers pay a percentage of sales in the form of ongoing and additional rebates to cover the cost of a supply chain improvement program called Active Retail Collaboration.
When suppliers refused to pay the extra rebates, which ranged from 0.1 per cent to 0.7 per cent of sales, they were threatened with commercial ramifications including range reviews.
After initially denying that it had mistreated suppliers, Coles admitted in December that it had engaged in unconscionable conduct and was fined $10 million by the Federal Court late last month.
Mr Kennett is now in the process of contacting the 220 smaller or tier 3 suppliers tapped for extra rebates, asking them to assess their position and consider their options.
“The process is very much alive,” Mr Kennett said.
“For about 53 [suppliers] it’s clear cut – they didn’t pay any rebates [under the ARC] so I don’t think they’ve got any claims.
“The other 150 need to have a look at what’s been agreed between Coles and the ACCC, make a decision and come back to me.”
Under Coles’ original undertaking, suppliers were to have been assisted by an independent accounting firm, which would help them assess the rebates paid to Coles and calculate the value of the benefit they received.
Mr Kennett said much of the rebate information was computer generated and, with the approval of the ACCC, the appointment of an independent accounting firm has been put on hold.
“I don’t see the need to get outside firms involved,” he said.
However, Mr Kennett has appointed a lawyer to help him liaise with suppliers.
“The process has been a lot more time consuming than I envisaged in order to do it properly,” he said.

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