Woolies faces court in $60 million unconscionable conduct case

MARKET bully or fair play? Woolworths is in court this week defending its controversial scheme to extract $60 million from suppliers.

MARKET bully or fair play?

The Federal Court will decide, after Woolworths defends a controversial policy to extract $60 million in extra payments from suppliers.

The retail giant is in court this week fighting allegations of unconscionable conduct over is Mind the Gap scheme, under which it demanded extra payments from so-called tier two suppliers, to plug a $50 million hole in Woolworths’ profits in the second half of 2014.

The Australian Competition and Consumer Commission alleges that the retailer took advantage of its market power to make 821 suppliers fork out payments of between $4,291 and $1.4 million each, with four days’ notice.

Category managers or buyers would contact the suppliers using a prepared script supplied by superiors, who were under pressure to find ways to address the profit shortfall, the ACCC alleges in its statement of claim.

“If the supplier did not make the Mind the Gap payment to Woolworths, the supplier would not be supporting Woolworths,” the script allegedly said.

“Woolworths could only support those suppliers that in turn supported Woolworths.”

The ACCC is seeking injunctions, including an order requiring the refund of $18.1 million, as well as a pecuniary penalty of up to $1.1 million, plus its costs.

Woolworths, which managed to squeeze $18.1 million from about 200 suppliers through the scheme, says the payments were in line with normal industry practice.

“We believe our conduct was consistent with Australian and international industry practice to engage regularly with suppliers over product and category performance,” a company spokesman previously said.

“Woolworths believes in working cooperatively with suppliers. Woolworths was the first major supermarket to agree to sign the Grocery Code of Conduct and is currently implementing the Code across its business.”

Coles settled a similar case with the ACCC in late 2014, agreeing to pay more than $10 million in fines and refund more than $12 million to suppliers.

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