Coles resists ACCC push to merge cases

COLES is resisting a push by the competition regulator to fuse two unconscionable conduct cases into a single court action.

A Coles supermarket in Perth. Picture: Bloomberg

COLES is resisting a push by the competition regulator to fuse the two unconscionable conduct cases launched against it into a single court action, preferring to fight each court battle separately to give it a better chance of success as well as protecting the reputation of its most senior ­executives.

It is believed Coles will argue against a push by the Australian Competition & Consumer Commission to join its first court case against the supermarket chain, launched in May, with a second case that was unveiled two weeks ago.

The cases both allege Coles engaged in unconscionable conduct against food and grocery suppliers — and share some similarities, such as supermarket executives allegedly squeezing suppliers for money — but mostly divert into different parts of the supermarket business and deal with different facts.

Coles is understood to be keen to keep the cases separate, especially as the second case only deals with allegations against five suppliers, whereas the first legal action cites alleged unconscionable conduct against 200 ­suppliers.

Importantly, the ACCC’s proceedings, launched in May, name current Coles boss John Durkan as a central player in attempts to allegedly extract up to $16 million from suppliers as part of Coles’ Active Retail Collaboration program, but the second case makes no mention of Mr Durkan.

At a directions hearing in the Federal Court in Melbourne on Friday, counsel for the ACCC, Norman O’Bryan SC, began his submission by requesting the two cases be joined into one action.

Mr O’Bryan SC told judge ­Michelle Gordon that the two cases shared similar facts, witnesses and more than 600 pages of documents. It is also believed only one or two of the suppliers are named as alleged victims in both cases.

But before Mr O’Bryan SC could develop his argument, Justice Gordon criticised the ACCC and Coles for not making the case simpler, arguing she would not allow the twin cases to turn the court into a “royal commission” or “large extravaganza”.

Justice Gordon was particularly critical of the way the ACCC had prepared its case, and told both parties to go away for a week to try to crystallise the facts into a more focused court action that had less “baggage”.

Counsel for Coles, Neil Young QC, argued that as the respondent Coles could only react to what the ACCC did. He did not have an opportunity to mount an argument against the suggestion from opposing counsel to fuse the twin cases.

In May, the ACCC launched its first action against Coles over the alleged mistreatment of 200 suppliers who were squeezed for money as part of Coles’ ARC program. It is alleged Coles devised a strategy in 2011 to pump up its earnings by demanding ongoing rebates from these smaller suppliers based on purported benefits flowing from improvements made to Coles’ supply chain.

The second unconscionable conduct case, unveiled this month, alleges Coles demanded hundreds of thousands of dollars from five suppliers in 2011 in contravention of the Australian Consumer Law.

It is alleged by the regulator that Coles attempted to extract payments from suppliers when a gap appeared between profit targets set for products by Coles and what the products actually earned the supermarket. Coles also allegedly demanded payments from these suppliers for products that weren’t delivered or “wasted” products.

The case continues in the ­Federal Court on Friday.