Coles fronts court
Coles will pay $11.25 million in fines and costs but could end up paying more than double that refunding its suppliers, after a court agreed to the supermarket giant’s settlement with the competition watchdog.
Federal Court judge, Michelle Gordon, said Coles had engaged in illegal and unconscionable conduct in its dealings with suppliers, including demanding payments that it was not entitled to to fill its own profit gaps and threatening commercial consequences.
Justice Gordon had suggested last week that the settlement with the Australian Competition and Consumer Commission (ACCC) had not involved severe enough penalties but ultimately accepted it, saying on Monday that she had taken Coles’s admission of wrongdoing into account.
The $10 million in fines applies to Coles’ treatment of suppliers involving 15 instances and eight suppliers in which it breached consumer law.
It threatened commercial consequences including not granting future contracts or promotion of products if it did not pay rebates to Coles to fund a supply chain improvement program or fill profit gaps.
More than 200 suppliers will now potentially be able to seek refunds from Coles over extra payments that were demanded to fill in gaps in profit, related to Coles squeezing suppliers when it felt it had not made enough of a profit on products for various reasons such as poor sales, discounts or waste.
The ACCC’s court documents released earlier this year included evidence of internal emails from Coles executives detailing an annual “profit day”, in which staff were pushed to squeeze suppliers for payments to fund profit gaps.
ACCC chairman, Rod Sims, described Coles’ conduct as unconscionable, a misuse of market power and unfair profit shifting from suppliers to Coles when the second of two legal cases was brought in October.
Coles is the second largest retailer of grocery products in Australia.
Justice Gordon strongly criticised Coles saying its misconduct was serious, deliberate, and repeated and that it misused its bargaining power.
“It was contrary to conscience,” she said.
“Coles treated its suppliers in a manner not consistent with acceptable business and social standards which apply to commercial dealings.
“Coles demanded payments from suppliers to which it was not entitled by threatening harm to the suppliers that did not comply with the demand.
“Coles withheld money from suppliers it had no right to withhold.”
She noted that Coles now admits that its conduct was contrary to law and involved serious breaches.
Coles MD, John Durkan, repeated last week’s apology.
Durkan said the company unconditionally apologises and accepts full responsibility for its actions in these supplier dealings.
“Since these incidents occurred in 2011, Coles has taken many steps to both improve its relationships with suppliers and help its suppliers grow,” he said.
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