Coles to pay $11.25m in fines and costs over bullying suppliers

COLES will pay $11.25 million in fines and costs but could end up paying more than double that refunding its suppliers following a settlement.

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.

EARLIER: COLES ADMITS TO CROSSING THE LINE

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 had not involved severe enough penalties but ultimately accepted it, saying on Monday that she had taken Coles’ admission of wrongdoing into account.

The supermarket giant will enter into a formal process to provide options for redress to the more than 200 suppliers mentioned in the proceedings.

In her judgment, Justice Gordon described Coles’ misconduct as “serious, deliberate and repeated”, and said its practices, demands and threats were “deliberate, orchestrated and relentless”.

“Coles misused its bargaining power. Its conduct was ‘not done in good conscience’. It was contrary to conscience. Coles treated its suppliers in a manner not consistent with acceptable business and social standards which apply to commercial dealings,” she said.

“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. Coles’ conduct was of a kind which merits severe penalty.”

ACCC Chairman Rod Sims hailed the outcome.

She said if it weren’t for Coles making admissions, its conduct would have warranted imposing penalties “at or close to the maximum the law permits”.

ACCC chairman Rod Sims said it was a significant outcome, being one of the first findings of unconscionable conduct in a business-to-business context under the Australian Consumer Law.

“Much more important is the magnitude of the penalties imposed and the recognition by the Court that Coles’ conduct in its dealings with suppliers was unconscionable and in contravention of the Australian Consumer Law. This should send a clear signal to larger businesses generally about appropriate business conduct in commercial dealings with smaller suppliers,” said Mr Sims.

He added that in many ways it was a shame a court decision was needed “to determine what 99.9 per cent of the population would think was inappropriate”.

“Companies need to understand that if they’re doing something the vast majority of the population would think is wrong, then it is wrong and likely a breach of our law,” he said.

Coles managing director John Durkan said Coles respects the determination made by Justice Gordon. “I want to reiterate that Coles unconditionally apologises and accepts full responsibility for its actions in these supplier dealings,” he said.

“Coles crossed the line in the supplier dealings in 2011 subject to these proceedings and regrettably treated these suppliers in a manner inconsistent with acceptable business practice. They were not treated with the transparency and respect that they should be able to expect.”

Mr Durkan said Coles had taken steps to improve its relationships with suppliers since 2011, implementing a best-practice compliance framework to ensure they are treated in an open and fair manner.

Mr Sims confirmed the ACCC had commenced an investigation following reports in Fairfax Media last week that Woolworths threatened to pull suppliers’ products from shelves if they did not help fund the supermarket’s ‘Cheap Cheap’ advertising campaign.

[e-mail]