The Australian competition watchdog is taking supermarket giant Woolworths to court for allegedly engaging in unconscionable conduct in its dealings with a large number of its supermarket suppliers.
The Australian Competition and Consumer Commission alleges that in December last year Woolworths sought to obtain payments from 821 “tier B” suppliers.
The suppliers were allegedly asked for payments ranging between $4291 to $1.4 million in order to support the supermarket.
Woolworths did not have a pre-existing contractual entitlement to seek these payments and leveraged its bargaining position while seeking the payments, according to the competition watchdog.
ACCC chairman Rod Sims said in a statement Woolworths’ ‘Mind the Gap’ strategy was “unconscionable in all circumstances”.
It is difficult for suppliers to plan and budget for the operation of their businesses if they are subject to such ad hoc requests,” Sims said.
“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. Of course, the allegations against Woolworths are separate and distinct from the Coles case.”
The ACCC is seeking injunctions and an order requiring full refunds for suppliers that contributed to the ‘Mind the Gap’ scheme.
A directions hearing is due to occur in the Federal Court in Sydney early next year.
SmartCompany has contacted Woolworths for comment.
The allegations against Woolworths show why Australia needs an effects test, according to Jos de Bruin
Jos de Bruin, chief executive of Master Grocers Australia, told SmartCompany the allegations against Woolworths show why Australia needs an effects test, as recommended in the Harper Review.
“All this does is confirm to us that the likes of Woolworths and Coles misuse their market power and we shouldn’t be lead to believe that because they’re big they do everything correctly and properly,” de Bruin says.
“It just reinforces why competition laws need to be strengthened, particularly section 46 which is about the misuse of market power.”