A competitor is bullying a supplier to stop supplying us. What can I do? Alan Wein answers.
By Alan Wein
I run a fast-growing company with 18 employees. One of our major suppliers also supplies a competitor. The competitor, a foreign multinational, has threatened to drop the supplier if they keep doing business with us. I am angry at the blatant bullying but feel my options are limited. What can I do?
Alan Wein answers: This threatens to propel you and your competitor into a legal minefield. You may be able to take legal action or lodge a complaint with bodies such as the Small Business Commission (in Victoria) or the Australian Competition & Consumer Commission, but before you do that why not try mediation?
In many cases, disputes can be solved much more cheaply and easily through mediation than by court action. More importantly, however, it can provide a means of resolving a dispute without destroying the relationship between the parties. In this situation, you hope to continue doing business with your supplier; if you use mediation, it is more likely you will be able to do so.
Will they come to mediation?
Many commercial agreements contain a dispute resolution clause by which both parties agree to try and resolve disputes through a non-litigious mediation or arbitration process in the first instance. In this case, if there is a contract supply agreement in place that contains a dispute resolution clause, it may be possible to compel your supplier to participate in mediation by activating the clause.
If not, it may be necessary to encourage the supplier to participate in mediation. Point out the time and cost advantages mediation has over legal proceedings, not to mention that fact that court hearings are usually held in public, with all the consequences for reputation and brand that brings.
If that doesn’t work, make it clear that you are serious about seeking redress. The supplier will think twice about passing up the opportunity to talk if the alternative is lodgment of a complaint with, and investigation by, the ACCC, although such a threat should be used cautiously and carefully.
Who will act as a mediator?
You mediation should be conducted by an experienced, independent, third-party mediator. If your contract doesn’t specify a mediator, check to see if there is a specialist mediation body for your industry.
Otherwise, you should appoint an independent mediator or arbitrator from one of the properly recognised alternative dispute resolution (ADR) associations in Australia such as LEADR or IAMA, or the state-based law institutes. These associations act as referral services with appropriately experienced and qualified mediators and require their panel of mediators to have full accreditation and training, experience and comply with approved standards of practice.
There are also private professional mediation practices that offer mediation services. It is important to ensure that private practice mediators or arbitrators are properly qualified, experienced in the area of the dispute and accredited.
What happens at mediation?
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A competent mediator could manage a conversation between yourself and the supplier that:
- Clarifies the issues and explores whether there are other reasons supply is being cut to you.
- Examines the historical relationship between the parties and the loyalty shown by you and how that loyalty must mean something.
- Looks at the consequences for both parties if the supply contract is cut; for example, risk of the multinational not being as reliable a buyer as your business should be considered.
- Canvasses the possible options for supplying your business with different products and services or the introduction of discount arrangements based on performance incentives, thereby encouraging meaningful competition.
It can be difficult to manage disputes in a way that produces a result without destroying the business relationship between the parties. Mediation holds out the possibility of achieving this and is much cheaper and quicker than legal proceedings.