Australia’s competition watchdog is taking supermarket giant Coles to court over what is alleges is the “unconscionable” treatment of its suppliers.

The Australian Competition and Consumer Commission (ACCC) has accused Coles of putting undue pressure on 200 of its smaller suppliers and providing them with misleading information as part of an effort to improve its earnings.

The ACCC has initiated proceedings in the Federal Court against Coles, following a two and a half year investigation.

Chairman, Rod Sims, said Coles’s treatment of its small suppliers had the potential to cause significant detriment to their businesses.

“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,” he said in a statement on Monday.

“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 ACCC’s case centres on Coles’ efforts to obtain rebates from smaller suppliers, based on purported benefits they had received as a result of changes to its supply chain.

It argues Coles provided misleading information to suppliers about the value of the supply changes to their business and used undue influence to obtain payment of the rebate.

The consumer watchdog has also accused the supermarket giant of taking advantage of its superior bargaining position by seeking payments without a legitimate basis and requiring payments without giving them time to asses the value of the supply chain changes.

It is seeking seeking pecuniary penalties, declarations, injunctions and costs.

These are the first proceedings to arise from the ACCC’s investigation into major supermarket chains treatment of suppliers.

The ACCC launched the investigation in late 2011 and began receiving confidential evidence from suppliers in February 2012.

It says the investigations are continuing.

AAP