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Coles case: watchdog bares its teeth

ACCC chairman Rod Sims ... viewed as a champion of the consumer.

ACCC chairman Rod Sims ... viewed as a champion of the consumer. Photo: Michael Clayton-Jones

Today's much anticipated Federal Court stoush between the supermarket giants and the competition and consumer watchdog may not have the spectacle of Sunday's punch up between James Packer and David Gyngell but there is every possibility that either could lose some teeth.

Coles, which is the subject of Australian Competition and Consumer Commissions legal action mounted on Monday, has been waiting for the axe to fall. The two supermarket groups had been given plenty of warning that the ACCC was getting a case together on the supermarkets' treatment of small suppliers and have for more than a year been attempting to ameliorate the issue by devising a Food & Grocery Code of conduct.

The ACCC's legal action on Monday follows recent stoushes between it and the supermarkets heavyweights over a raft of issues including their use of discount fuel shopper dockets, store acquisitions, and engaging with large suppliers in cartel behaviour.

The small supplier case is the latest salvo in competition and consumer regulator's three year mission to stamp out what it sees as the strong arm tactics of the two large supermarket chains in their treatment of the small suppliers whose products populate the shelves.

The ACCC filed a claim in the Federal Court alleging the company engaged in unconscionable conduct when it introduced a new supply chain and logistics program which was billed as one which would benefit its suppliers and which warranted them paying additional rebates to the supermarket.

Instead the ACCC contends the imposition of the rebates was a means by which Coles would increase its own earnings at the expense of the 200 small suppliers it as identified as victims of the rebate-based logistics scheme.

The public has become all too familiar with complaints from small suppliers — most of which (the ACCC contends) have remained anonymous for fear of retribution from the supermarkets.

The ACCC alleged that when suppliers declined to agree to pay the rebate, Coles personnel were instructed to escalate the matter to more senior staff, and to threaten commercial consequences if the supplier did not agree. The ACCC alleges that, in a number of cases, threats were made when suppliers declined to agree to pay the rebate.

The heavy handedness of the collection strategy was allegedly combined with Coles' provision of misleading information to suppliers about the savings and value to them from the changes Coles had made. The supermarket also took advantage of its superior bargaining position by, amongst other things, seeking payments when it had no legitimate basis for seeking them, according to the ACCC.

Coles said yesterday that the improvements to both supply chain collaboration and efficiencies in logistics was designed to deliver benefits to all including, suppliers and customers through lowering costs and improving availability of stock in our stores.

The supermarket duo takes the view that its war with the regulator has a lot more to do with politics than its own behaviour. Its about restoring the regulator's credentials as an advocate for the consumer and a supporter of the small business lobby which has been crying for additional support from the government in the post GFC environment in which they have been pressured by shrinking margins.

Certainly ACCC chairman Rod Sims is viewed as a champion of the consumer and unfazed by the might of large business — a position that stands in stark contrast to his counterpart at the Australian Securities and Investments Commission, Greg Medcraft, who is seen as being too close to big business.

2 comments so far

  • It is a wonder the ACCC have taken so long to do something about this. It has been know for "centuries' that the Big Two have been screwing suppliers to the wall. Forcing suppliers to accept lower payment for their product, just to continue as a supplier.
    A fair price should be paid to the supplier for the product, to cover the costs of production and a reasonable profit.
    Where the major costs are incurred is on this side of the farm gate. where all of the secondary and tertiary businesses are making profit at the expense of the supplier.
    Soon we will become a mass importer of product, because the "little bloke" will pack his bags and leave

    Sunshine Coast
    Date and time
    May 05, 2014, 3:00PM
    • Agreed Peter,unfortunately with all their platitudes both Labor and the Coalition have done little to prevent this plundering of the "little bloke" by the Big Two.

      Watch My Lips
      E Gippsland
      Date and time
      May 05, 2014, 11:22PM

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