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Predatory behaviour? Investigation at Coles

Date

Eli Greenblat and Lucy Battersby

Coles and Woolworths may have misused their market power by demanding additional payments from suppliers, the ACCC says.

Coles and Woolworths may have misused their market power by demanding additional payments from suppliers, the ACCC says. Photo: Sean Davey

The owner of Coles is conducting an internal investigation that will examine whether the nation's second-biggest supermarket chain is engaging in improper predatory and anti-competitive behaviour in its dealings with suppliers.

Australian consumers for too long have worn higher and higher prices for food and groceries in this country. 

Richard Goyder

Wesfarmers managing director Richard Goyder confirmed the internal investigation during a press conference for Wesfarmers half year results this afternoon, after the head of the competition watchdog launched a blistering attack on the supermarket chains last night.

‘‘We are doing our own investigations and obviously the ACCC is doing its and we will just let it all unfold,’’ Mr Goyder said.

While both major supermarket chains claim to have ongoing and constant reviews of their compliance practices, BusinessDay believes that Coles has escalated its internal investigation in the wake of the Australian Consumer and Competition Commission's recent focus on the supermarkets.

Breach of competition law?

Coles and Woolworths may have misused their market power by imposing unfair penalties on suppliers, demanding additional payments and discriminating against them in favour of their private label brands, Australian Competition and Consumer Commission chairman Rod Sims told the Senate economics estimates committee in Canberra last night.

The ACCC was also concerned about the supermarket giants’ shopper dockets offering petrol discounts, as they could not be matched by other fuel retailers, and Mr Sims said the regulator was close to finalising an investigation into the petrol discounts.

He said the regulator had obtained ‘‘considerable material from the major supermarket chains’’, confirming that 50 businesses that supply the supermarket giants had spoken to the ACCC in the past year. The ACCC was still investigating their claims.

‘‘Now that we understand the broad nature and context of the alleged conduct, it is evident that, if fully put to proof, this conduct may constitute a breach of the [Competition and Consumer] Act and so it is now being investigated in even more detail,’’ he said.

Mr Sims said the alleged conduct by both Woolworths and Coles included:

  • Persistent demands for additional payments from suppliers, above and beyond that negotiated in their terms of trade;
  • The imposition on suppliers of penalties that did not form part of any negotiated terms of trade, and which apparently do not relate to actual costs incurred by the major supermarket chains as a result of the conduct which has led to the penalty being imposed;
  • Threats to remove products from supermarket shelves or otherwise disadvantage suppliers if claims for extra payments or penalties are not paid;
  • Failure to pay prices agreed with suppliers; and  conduct discriminating in favour of homebrand products.

The ACCC was now using compulsory information powers to investigate Coles and Woolworths’ treatment of other suppliers, but has not yet decided whether it will take legal action, Mr Sims said.

A Woolworths spokeswoman was unavailable for comment.

Working with the regulator

Mr Goyder said Coles was constantly supplying material to regulatory authorities and that the company had internal processes to make sure the Coles operation acted in a responsible and ethical way with its suppliers.

He said the conglomerate was focused on making sure it conducted its relationship with suppliers in a proper way, and was investigating Coles to ensure this was the case.

‘‘That [the investigation] has been something that we have had to ensure we have got right," he said. ‘‘We seem to always be asked by regulatory authorities to provide information on various things.’’

Mr Goyder said the ACCC also had more than enough power at the moment to deal with how Coles behaves, as well as the behaviour of its suppliers, seemingly downplaying suggestions the regulator should be given more authority to investigate the sector.

Gaining 'price trust'

Hitting back at suggestions Coles was squeezing its suppliers, Mr Goyder said since Wesfarmers acquired the business in 2007 and a new management was put into the business in 2008 that it needed to gain ‘‘price trust’’ from consumers.

‘‘Australian consumers for too long have worn higher and higher prices for food and groceries in this country above the rate of inflation.’’

Wesfarmers is the owner of Coles, Bunnings, Target, Kmart and Officeworks.

Meanwhile, Mr Sims said he expects the ACCC will finish an investigation into petrol discount vouchers offered to customers who purchase a minimum amount from a supermarket.

He said the ACCC was looking as whether Coles and Woolworths offers ‘‘may have the effect of distorting competition between fuel retailers in circumstances where, having regard to retail fuel margins, the discounts may be difficult or even impossible for other fuel retailers to match’’.

14 comments

  • Blah blah blah about nonsense.Petty petrol voucher beef ups or is that beat ups?Whatever,whatever.ACCC ---Forget it.

    Commenter
    Kane
    Date and time
    February 14, 2013, 3:03PM
    • An internal investigation aye- should get to the bottom of that one! Sounds curiously like a piece of vacuous PR to me.

      Commenter
      Chelseaf
      Location
      Tumba
      Date and time
      February 14, 2013, 3:10PM
      • An internal investigation? to get to the bottom of things? Didn't Tim Mathieson get into trouble for that recently? Seriously though Chelseaf, you are absolutely right.

        Commenter
        Brian Harry
        Location
        Tweed Heads NSW
        Date and time
        February 14, 2013, 3:52PM
    • Down Down, Coles is going Down !

      Commenter
      SydMan
      Location
      SYD
      Date and time
      February 14, 2013, 3:31PM
      • An internal investigation should quickly uncover the non-biased truth. Worked wonders for the Catholic church.

        Oh wait...NOT.

        Commenter
        Jimmy
        Location
        Not_Oz
        Date and time
        February 14, 2013, 3:33PM
        • Whoa !!! ... Coles and Woolies must be shaking in their boots. How often does a toothless tiger try to get it's claws into you.

          Commenter
          Special K
          Location
          CBD
          Date and time
          February 14, 2013, 3:45PM
          • I wonder if the duopoly will "Cliff" the ACCC like they do suppliers.

            Commenter
            Richo
            Location
            Melbourne
            Date and time
            February 14, 2013, 3:46PM
            • How I wish Coles executives would be prosecuted and ordered to pay back the millions if not billions it owes its suppliers... let alone the consumer with the absolute price gouging they get away with.

              This country is so corrupt.

              Commenter
              corruption rules
              Date and time
              February 14, 2013, 3:46PM
              • There is no doubt Coles and Woolies are the playground bullies and heaven help any that stand in their way. Using fuel vouchers from one store to destroy your competitors in another is patently predacious yet nobody dares to speak up for fear of alienating the voting populace that all drive. Supermarkets own brands that replicate the style, colour and design of leading brands packaging, place themselves in the prime position and then move the leading brands to out of sight areas is another predacious technique employed.

                Why does my store stock Coles brand milk but the area for Pauls is always empty? Nothing better for competition than not stocking the competitors product! Plenty of evidence of certain brands having a Supermarket imposed 'holiday' when they refuse or are incapable of bending to the will of the giants.

                The sad thing is that we have not only allowed this dominance to occur but we've enabled it by caring more about a few extra cents in our pocket than in the quality of our food, or more importantly the quality of our communities.

                Commenter
                Uncommon Sense
                Location
                Melbourne
                Date and time
                February 14, 2013, 3:51PM
                • Just as they do with Christmas and Easter, Coles is starting April Fool's Day 6 weeks early this year.

                  A headline we might see on April 1: Colesworths unreservedly agree with ACCC requests

                  Commenter
                  Mawashi
                  Date and time
                  February 14, 2013, 3:53PM

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