Coles ordered to repay suppliers $12m

1 July 2015 | A number of Coles' suppliers will be refunded as part of the ACCC's proceedings over unconscionable conduct.

Coles pays for 'unconscionable conduct'

Coles has been ordered to repay a number of smaller suppliers more than $12 million as a result of proceedings undertaken by the ACCC.

This repayment to suppliers is in addition to the $10 million Coles was fined last December for engaging in unconscionable conduct against its suppliers.

So far, high level feedback suggests suppliers are "largely satisfied" with the redress provided by Coles and a "very large number" of suppliers accepted the refund, according to ACCC chair Rod Sims.

The $12 million remedy for suppliers is part of the resolution process resulting from last year's court proceedings where Coles proposed to establish a formal process to provide options for redress for affected suppliers.

Two proceedings were instituted against Coles in 2014 for its conduct with suppliers, an issue which CHOICE looked at in depth back in 2011. The first was specifically in relation to supplier dealings through Coles' Active Retail Collaboration (ARC) program, and the other related to Coles' day-to-day interactions with a number of suppliers.

Independent arbiter Jeff Kennett rules on refunds

This latest resolution process involved an independent arbiter, The Hon Jeff Kennett AC, assessing which suppliers would be eligible for a refund of the rebates they had paid to Coles' Active Retail Collaboration (ARC) program. Mr Kennett contacted 220 suppliers and met with around 110 suppliers to assess their eligibility. The arbiter also ruled on the issues relating to the day-to-day dealings with suppliers.

As part of Coles' ARC program, suppliers were asked to pay an ongoing rebate to Coles in return for purported benefits as a result of changes Coles had made to its supply chain.

However, last December, the court found that when certain suppliers refused to pay the rebate, Coles engaged in unconscionable conduct by threatening commercial consequences. Those consequences included the threat of removing the suppliers' products from the shelves; risks to promotional activity; refusing to meet with the supplier about their business; and cancelling existing contractual obligations with the supplier.

Under the arbitration process, suppliers were also able to exit the ARC program as well as seek a review of their eligibility for refunds and a number of suppliers took this option.

Coles to sign up to food and grocery code

In addition to the recompense provided to suppliers, Coles has also advised that it will become a signatory to the Food and Grocery Code of Conduct.

The code is voluntary and is designed to introduce an effective and equitable dispute resolution process for disputes arising between retailers or wholesalers and suppliers. Aldi and wholefoods supermarket chain About Life are already listed as signatories to the code, and in early June Woolworths announced it had signed up.

In handing down the ruling last December, Justice Gordon said: "Coles' misconduct was serious, deliberate and repeated. Coles misused its bargaining power. 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' has apologised unconditionally and accepted full responsibility for its actions in relation to supplier dealings.