ACCC accuses Woolworths of unconscionable conduct
by Sarah Danckert, Sue Mitchell and Catie Low via mod - SMH Wednesday, Dec 9 2015, 10:04pm
nation wide /
The competition watchdog has launched legal action against supermarket giant Woolworths for unconscionable conduct over is dealings with suppliers to urgently reduce its half year profit shortfall by $18.1 million.
The Australian Competition and Consumer Commission instituted proceedings in the Federal Court alleging Woolworths acted in contravention of the Australian Consumer Law.
The ACCC alleges that in December 2014, Woolworths developed a strategy, approved by senior management, to urgently reduce Woolworths' expected significant half year gross profit shortfall by 31 December 2014.
The consumer protection filing by the Australian Consumer and Competition Commission comes just 15 days ahead of Christmas.
The case caps off a horror year for Woolworths, which has downgraded profits three times and lost its chief executive, its chairman and a string of senior executives.
The ACCC alleges that Woolworths sought approximately $60.2 million in so-called "Mind the Gap" payments from the its Tier B suppliers, expecting that while many suppliers would refuse to make a payment, some suppliers would agree.
It is alleged that Woolworths ultimately captured approximately $18.1 million from these suppliers. That additional income flowed through to Woolworths' gross profit, the ACCC alleges.
It is also alleged by the ACCC that, in accordance with the Mind the Gap scheme, Woolworths' category managers and buyers contacted a large number of the Tier B suppliers and asked for Mind the Gap payments from those suppliers for amounts which included payments that ranged from $4,291 to $1.4 million, to "support" Woolworths.
Not agreeing to a payment would be seen as not "supporting" Woolworths.
Woolworths faces fines and other penalties if found to have breached consumer law.
The ACCC is also seeking orders restraining Woolworths and its agents for a period of five years from seeking payments from suppliers in respect to any shortfall between the profit Woolworths was making from the sale of products and what it wants to make on a sale.
"The ACCC alleges that Woolworths' conduct in requesting the Mind the Gap payments was unconscionable in all the circumstances," ACCC chairman Rod 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," Mr Sims said.
The ACCC alleges in its statement of claim filed on Thursday afternoon, Woolworths breached consumer law by calculating amounts to be sought from Tier B suppliers based on how much profit Woolworths wanted to make or on how much money the supplier had coughed up enough money to "be a supporter" of its business.
The ACCC alleges the company did this "without regard to whether Woolworths had any other legitimate basis to seek the amounts" and did so purely to boost profit "and not to promote the sales of their Tier B suppliers products".
Woolworths representatives used a script to seek payments from suppliers and expressly or impliedly within a four days of receiving the call, or at the latest by December 19, 2014.
Earlier this week the ACCC revealed Woolworths and Aldi had written to over 1000 suppliers clarifying that suppliers are able to negotiate terms of the grocery supply agreements following the ACCC's concerns.
© 2015 Fairfax Media
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