According to
reports in ABC Au News, the ACCC said the supermarket giant had set up the Active Retail Collaboration (ARC) program to make 200 small suppliers pay rebates to boost the company's profits. Details of specific charges
here.
Even more importantly, the court used the word ‘unconscionable’ to describe Coles behaviour.
Unconscionable conduct is generally understood to mean conduct which is so harsh that it goes against good conscience.
Under the Australian Consumer Law, businesses must not engage in unconscionable conduct, when dealing with other businesses or their customers, following a Federal Court decision to uphold an Australian Competition and Consumer Commission (ACCC) settlement over supplier mistreatment.
The ACCC used its compulsory information gathering powers, forcing suppliers and Coles to provide information about the claims.
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Why this is serious
There are a number of factors an Au court will consider when assessing whether conduct in relation to the selling or supplying of goods and services to a customer, or to the supplying or acquiring of goods or services to or from a business, is unconscionable.
These include:
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the relative bargaining strength of the parties
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whether any conditions were imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party
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whether the weaker party could understand the documentation used
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the use of undue influence, pressure or unfair tactics by the stronger party
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the requirements of applicable industry codes
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the willingness of the stronger party to negotiate
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the extent to which the parties acted in good faith.
This is not an exhaustive list and it should be noted that the court may also consider any other factor it thinks relevant.
The key idea is that the Au authorities are using legislation and language that will guarantee the wide publication of the details in consumer media, in terms of criticism of retailers for abuse of power, especially with regard to small suppliers.
Application to the UK
Despite a distance of 10,500 miles, the case has to set important precedents for UK authorities….
Apart from the obvious pointers for strengthening UK rules, the case clearly demonstrates the ‘teeth’ that have been given to Au competition authorities, meaning that UK will have re-assess all current supplier-retailer practices in anticipation of eventual application here.
The Tesco SFO investigation will provide a platform and act as a catalyst in defining and accelerating appropriate change in the UK.
The problem for UK retailers is that the combination of 45+ days credit, trade investment of 20+% of purchases, deductions of 5+% and price-cutting currently result in Net Profit margins of approximately 3%, meaning that retailers will be unable roll-back any of these sources of income without diluting their profits…
It remains to be seen how early in 2015 the pace of equivalent change will begin to accelerate in the UK…
See here for guidance on How to avoid becoming a victim of unconscionable conduct, How to avoid engaging in unconscionable conduct, Penalties and remedies, and links to appropriate Au law.
