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It has been a year of scrutiny for retailers, and especially for Coles. Australia's second largest retailer is facing the ACCC's sixth action against it.

    In August this year, the Australian Competition and Consumer Commission (ACCC) took action against Coles, Woolworths and three other retailers, claiming they had fixed petrol prices by using a subscription only website to co-ordinate prices.

    In June, Coles was forced to apologise for misleading customers by marketing pre-baked frozen bread as "fresh baked in stores”.

    In May, the ACCC accused Coles of unconscionable conduct by using unfair tactics and misleading information to force about 200 suppliers to pay extra rebates to fund the cost of a supply chain improvement program, Active Retail Collaboration.

    In April, Coles was forced to admit that it misled consumers by claiming that farmgate milk prices had risen after it introduced $1 a litre milk. They had, in fact, decreased.

    Last December, the ACCC took action against Woolworths and Coles over excessive fuel discounts, forcing the chains to cap discounts funded by supermarkets at 4c a litre.

ACCC chairman, Rod Sims, has stated that the latest allegations are a matter of significant public interest as they relate to “unconscionable conduct by a large national company in its dealings with small business suppliers in the highly concentrated supermarket industry”.

So what are the complaints?

In a nutshell, the ACCC has instituted proceedings in the Federal Court against Coles for allegedly taking advantage of its superior bargaining position by demanding money from suppliers to which it was not lawfully entitled.

It alleges that Australia's second largest retailer breached the law by engaging in unconscionable conduct against five suppliers, including cleaning products company Oates, Benny's Confectionery and Bayview Seafoods.

It also pursued agreements to pay Coles, both retrospectively and prospectively, for amounts it claimed as “waste” on a supplier’s goods which occurred after Coles had accepted the goods, and price reductions, or “markdowns” implemented by Coles to clear goods. And it imposed fines or penalties on suppliers for short or late deliveries.

Here is an example of the behaviour that Sims has called the "most egregious" of "hundreds" of complaints made by suppliers against the major grocery chains over the last few years:

When Coles' profit from selling Oates cleaning products fell short of budget by $326,590 in 2011, Coles demanded that Oates pay the retailer the same amount, without explaining how it came to the figure or how the profit gap had occurred. When Oates refused to pay the full amount immediately, Coles deducted $246,400 from a payment that was due to Oates without its permission, the ACCC alleges. Coates, which is owned by GUD Holdings, eventually agreed to pay $365,200 after Coles flagged a "range review".

The statement of claims lodged in Federal Court also mentions that Coles sets aside at least one day a year called "Perfect Profit Day" when it set targets to recoup money from suppliers when profits failed to meet budgets.

Peter Strong, executive director of The Council of Small Business Australia (COSBOA), is now calling on suppliers who have been “stifled, who have been forced to label their professionalism and innovation skills behind Coles and Woolworth labels, or just been bullied,” to let COSBOA know.

“No doubt the highly paid and experienced lobbying army of Coles and Woolworths will now be mobilised in a campaign to maintain their dictatorship. COSBOA will actively support the ACCC’s current pursuit and continue to fight for equal rights and opportunities for small business people everywhere,” Strong stated.

Coles rejected the allegations, describing its communications with suppliers as "normal topics for business discussions" between grocery suppliers and retailers around the world. The allegations, it stated, concerned a limited number of dealings three years ago with just five suppliers who continued to do business with Coles.

“The allegations involve communications and negotiations about the failure to deliver products in the lead-up to the Christmas 2011 trading period, as well as waste and damage to products and the profitability of products.

Coles also said that during the cited period in 2011, its team members were working hard to get products on shelves for its customers in the lead-up to Christmas, the busiest trading period of the year.

Profit Day, Coles stated, "was an administrative day where discussions were held with suppliers in relation to outstanding claims and additional business opportunities".

“Coles conducts substantial training with all team members to ensure that its suppliers are treated in an open and fair manner. Furthermore, since 2011 Coles has taken substantial steps to improve its ways of working with suppliers.”

The retailer, which has launched a Supplier Charter, also defended charging suppliers for wastage and late deliveries, saying stock-outs and high rates of spoilage frustrated consumers and pushed up prices.   

Sims observed that a draft grocery code of conduct agreed between the major retailers and suppliers late last year would help to eradicate some of the behaviour that the ACCC considers illegal. The code of conduct is currently undergoing a regulatory impact review and is unlikely to be introduced until next year.

The Australian Food and Grocery Council, which negotiated the draft grocery code with Woolworths and Coles, welcomed the ACCC's latest action.

"In recent years there have been widespread reports of the practices described in the ACCC action being applied by the major supermarkets to boost their bottom line at the expense of suppliers. It is important that these allegations be tested in court," said AFGC chief executive Gary Dawson.

Peter Hunt, a spokesman for the Victorian Farmers Federation, stated, "This sort of behaviour, if proven, completely undermines the supermarket's efforts to gain farmer and suppliers trust. Once supermarkets have taken control of goods, farmers and other suppliers shouldn't be held liable for waste."

In the current action, Coles faces penalties of $1.1 million for each breach.

     

    

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