ACCC launches court action against Woolworths for ‘unconscionable conduct’ against suppliers
The Competition watchdog has launched court action against supermarket chain Woolworths alleging it engaged in unconscionable conduct by demanding more than $60m in supplier payments last year to plug a profit shortfall.
Woolworths: facing court action for unconscionable conduct.
The Australian Competition and Consumer Commission will allege that late last year senior Woolworths management approved the supplier payment scheme called ‘Mind the Gap’, which it is claimed was systematically aimed at urgently reducing Woolworths’ expected significant half year gross profit shortfall. It is alleged the supermarkets’ category managers and buyers contact 821 “Tier B” suppliers and asked for payments ranging from $4,291 to $1.4m to “support” the struggling retail chain.
Suppliers who did not agree to a payment would be seen as not “supporting” Woolworths and the ACCC will allege the chain chose suppliers where it had a substantially stronger bargaining position and did not have a pre-existing contractual entitlement to seek the payments.
“The ACCC alleges that Woolworths’ conduct in requesting the Mind the Gap payments was unconscionable in all the circumstances,” said Rod Sims ACCC Chairman.
“A common concern raised by suppliers relates to arbitrary claims for payments outside of trading terms by major supermarket retailers. It is difficult for suppliers to plan and budget for the operation of their businesses if they are subject to such ad hoc requests.”
The ACCC alleges that Woolworths sought approximately $60.2m in Mind the Gap payments from the suppliers, expecting that while many suppliers would refuse to make a payment, some suppliers would agree. It is alleged that the retailer ultimately captured approximately $18.1m from these suppliers.
“The alleged conduct by Woolworths came to the ACCC’s attention around the time when there was considerable publicity about the impending resolution of the ACCC’s Federal Court proceedings against Coles Supermarkets for engaging in unconscionable conduct against its suppliers,” said Sims.
Woolworths has this afternoon responded to the action with a media statement saying: “We are reviewing the ACCC claims. Woolworths has been fully cooperating with the ACCC during the course of the investigation over the last year.
“We believe our conduct was consistent with Australian and international industry practice to engage regularly with suppliers over product and category performance. 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.”
The competition watchdog is seeking injunctions, including an order requiring the full refund of the amounts paid by suppliers under the Mind the Gap scheme, pay penalty, a declaration, and costs.
The first directions hearing is set for February 1, 2016.
Nic Christensen
If this really is international practice, it needs to cease. That kind of “engagement” is something everyone can do without.
User ID not verified.
“We aren’t making margin, so you pay up, kapisch?”
That doesn’t sound like abysmal management.
User ID not verified.
Too much market power at play here.
Hence why they approached ‘Tier B’ suppliers as they would have the most to lose if they didn’t cough up the cash.
Bloody disgraceful conduct.
If its proven, the fine should be double what the suppliers had to pay.
User ID not verified.
It hasn’t been a very good year for Woolies, and it looks like it’s only going to get worse next year. I hope more people continue to boycott this horrendous business.
User ID not verified.
Yes what does “international industry practice” mean ? Bribery is a wide spread practice internationally, is that OK? The only way this will ever change is when the supermarket Duopoly is broken, then returning power back to customers and suppliers.
Can we Innovate that one please!/
User ID not verified.
Once upon a time a humble smith told an evil ruler that there were no resources available after hours to work at their beck and call, and instead they would have to wait for the sun to rise when the work could be done post haste. The evil ruler grew very angry and threatened to starve the entire village if their demands were not met. This worried the smith’s sire, and so sacrifices were made to appease the evil ruler. Nobody lived happily ever after.
User ID not verified.
So cowardly to go after the ‘Tier B’ suppliers, knowing full well that if they tried this nonsense with the Arnotts or Coca Cola’s of the world they would have been laughed at.Targeting vulnerable suppliers that are desperately trying to keep up with the big guys is a shameful act and they should be penalized severely.
User ID not verified.
Another glimmer of PR gold for the Woolworths press release section.
User ID not verified.
“international industry practice” is to demand free money from your suppliers when your sales are down? Really?
So if I buy my sausages and bread at Woolies to run a weekend sausage sizzle, but I don’t sell as many as I’d like, Woolies would be happy to hand a bunch of money over to me? Sounds great!
User ID not verified.