The new Federal Court legal action against Coles by the Australian Competition and Consumer Commission looks very similar to the action it launched against the supermarket group five months ago, but there are differences – and they make the new action more important.
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In the earlier move, the competition regulator accused Coles of unconscionable conduct in demanding that about 200 smaller supermarket suppliers pay extra money to participate in a Coles supply chain improvement program, Active Retail Collaboration.
The action grew out of complaints from suppliers after the ACCC called for confidential information – as has the new ACCC claim that Coles engaged in unconscionable conduct towards five suppliers.
The first action is tied to Coles' ARC supply chain project and the way it was designed.
The new action aims at things the ACCC says Coles did in its day-to-day dealings with the five suppliers, and as such potentially sets a more important general precedent for the behaviour of big companies.
The ACCC says Coles in 2011 pursued an agreement for suppliers to pay money that made up for "profit gaps" on the sale of the suppliers' goods – shortfalls between the amounts Coles wanted to make and the amounts it did make, in other words.
It also says Coles pursued an agreement for suppliers to pay for "waste", which can include shoplifting, and for price mark-downs. These are usually outside the control of suppliers, the ACCC says, and Coles took advantage of its superior bargaining power to pursue the payments.
Coles rejects the allegations, which it says relate to a "limited number" of dealings with five companies, which continue to be Coles suppliers. Coles has more than 4000 suppliers, it adds.
ACCC chairman Rod Sims makes it clear in the announcement of the new action, however, that he is looking to use the courts to get clarity what sort of conduct by big companies is unacceptable.
The ACCC believed Coles' behaviour was contrary to prevailing business and social values that underpinned standards for dealings with suppliers, he said, adding that the legal action would give the court "an opportunity to consider whether conduct of this nature, if proven, is unlawful in the context of large businesses dealing with their suppliers".
A chance to set a potentially far-reaching precedent, in other words. All big companies will be watching to see what the Federal Court decides.
