Struggling supermarket chain Woolworths has had a significant legal win after the Federal Court today dismissed a case brought by the Australian Competition and Consumer Commission (ACCC) over payments the grocer forced suppliers to make to cover profit shortfalls.
The ACCC alleged Woolworths had engaged in unconscionable conduct over its “Mind the Gap” scheme, which extracted $18 million from suppliers just before Christmas in 2014 to offset a $53 million shortfall half-yearly profit.
The plan, hatched in December 2014, saw Woolworths buyers contact more than 800 “tier-two” suppliers and asked them to urgently pay between $4,291 to $1.4 million to “support” Woolworths. They had just days to make the payments or were considered “unsupportive”. The payments were not part of any contract.
But Federal Court judge David Yates ruled the program did not breech Australian Consumer Law.
ACCC chairman Rod Sims said his organisation took legal action because it believed the Woolworths program “went well beyond hard commercial bargaining and is not consistent with business and community values”.
“If you’re a supplier subject to arbitrary demands, it’s very hard to make future investment decisions in the face of financial uncertainty,” he said.
Sims said the ACCC will consider the judgment.
The verdict is almost the opposite of a similar case involving Coles last year, which saw it reimburse around 200 suppliers $12 million as well as paying a $10 million fine.
In that instance, Justice Gordon found Coles has misused its bargaining power and the misconduct was “serious, deliberate and repeated”.
But the ACCC did not call the affected suppliers in the Woolworths case, instead presenting email exchanges as evidence – a move the supermarket’s defence team said weakened its case.
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