The Wesfarmers-owned Coles has been ordered by a court to pay $10 million for repeatedly demanding money from, and threatening, hundreds of its suppliers.
The supermarket giant also has to give court enforceable undertaking to establish a formal process to provide options for redress to more than 200 suppliers.
Former Victorian premier Jeff Kennett will decide on demands for refunds from suppliers.
The Federal Court today made declarations of unconscionable conduct against Coles, which has agreed to penalties, for its dealings with suppliers in 2011.
Justice Gordon said:
“Coles’ misconduct was serious, deliberate and repeated. Coles misused its bargaining power. Its conduct was ‘not done in good conscience’. It was contrary to conscience. Coles treated its suppliers in a manner not consistent with acceptable business and social standards which apply to commercial dealings. 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.”
The judge said Coles’ practices, demands and threats were “deliberate, orchestrated and relentless”.
Rod Sims, chairman of the Australian Competition and Consumer Corporation (ACCC), said this is one of the first findings of unconscionable conduct in a business-to-business context under the Australian Consumer Law.
“Much more important is the magnitude of the penalties imposed and the recognition by the Court that Coles’ conduct in its dealings with suppliers was unconscionable and in contravention of the Australian Consumer Law,” he said.
“This should send a clear signal to larger businesses in general.”
The Court’s decision followed a long-running investigation into supplier complaints in the supermarket sector.
Coles managing director John Durkan recently apologised, saying “Coles unconditionally apologises and accepts full responsibility for its actions in these supplier dealings.”
Wesfarmers shares are up almost 1% to $41.72.
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