Former Victorian premier Jeff Kennett ordered yesterday that Coles’ food and grocery suppliers be refunded more than $12 million after they were forced to pay extra rebates to join the supermarket’s supply chain program.
Kennett was appointed as an independent arbiter in August 2014 by the Australian Competition and Consumer Commission to resolve disputes between Coles and more than 200 small or third-tier food and grocery suppliers who joined Coles’ Active Retail Collaboration program.
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Kennett was asked to take on the role after sparking an ACCC investigation over Coles’ claims its bread was “freshly baked” when it was in fact baked in Ireland, frozen, and shipped to Australia.
Under the ARC program, the suppliers were forced to pay extra rebates and received fines for non-compliance.
In a statement released yesterday, the ACCC said the order also meant suppliers would now be able to exit the ARC program without penalty or having their ARC contribution rebates reviewed.
Kennett told SmartCompany this morning the order tied up claims stretching back to 2011 and represented a “major step forward” for Coles and its suppliers.
“It’s all about the outcomes rather than where you start – the outcome is Coles is developing a much better relationship with suppliers,” he says.
“Coles is in a strong position at the moment with good leadership, if they use these good times to improve relationships with suppliers it positions them well for the next decade.”
The outcome demonstrates while large supermarkets and small suppliers shared a “tough” relationship during the initial price-setting stage, they could establish good working relationships thereafter, Kennett says.
“I’m not opposed to Coles being tough with suppliers with the price, but once you settle on a price, start to enter into strong relationships with suppliers, talking to them regularly, encouraging innovation,” he says.
“That’s where I see a great potential and upside, in actually getting suppliers to be more innovative.”
ACCC chairman Rod Sims says in a statement he welcomed Kennett’s instruction, which would result in further savings for Coles’ suppliers.
“The arbitration process conducted by Mr Kennett has proven both extremely timely and effective with significant benefits to suppliers,” ACCC chairman Rod Sims said.
“The process will also deliver flow on effects for suppliers more broadly as a result of changes Mr Kennett says Coles has begun to implement that affect the way it deals with its suppliers.”
Council of Small Business Australia chief executive Peter Strong told SmartCompany he welcomed the news, while acknowledging the work Coles had done in addressing the supply chain issues.
“They’re not fighting this, they’re working with them,” he says.
In a statement provided to SmartCompany, Coles spokesperson says Coles accepts and respects the outcome of the independent arbitration process, which was set up in consultation with the ACCC and approved by the Federal Court.
“In addition to the arbitration process, Coles has taken many steps since 2011 to improve its relationships with our thousands of suppliers and help them grow, including the implementation of a formal Supplier Charter which sets out our commitment to fair relationships and establishes a strong, independent and confidential dispute resolution process.
“We thank Mr Kennett for his work to rapidly address the concerns of these suppliers and will continue to work with him as an independent arbiter under the terms of the Coles Supplier Charter.”
*This article was updated at 2pm on July 2 to include comments from Coles.