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 


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