ACCC v Coles Supermarkets Australia Pty Ltd

ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (22 December 2014)

Overview

The ACCC alleged that Coles Supermarkets engaged in unconscionable conduct in 2011 in dealing with certain suppliers.

On 22 December 2014 the Federal Court, by consent, made declarations that a contravention of s 22 of the Australian Consumer Law had occurred and ordered Coles to pay combined pecuniary penalties of $10 million and costs. In addition, Coles entered into an enforceable undertaking with the ACCC to establish a process for redress to the suppliers referred to in the proceedings.

Justice Gordon stated (my emphasis):

102 Coles’ misconduct was serious. I reject Coles’ submission that these contraventions are somehow distinguishable, or of a less serious nature, because they did not involve vulnerable consumers. Coles’ conduct did not involve vulnerable consumers. Coles’ conduct did involve vulnerable suppliers – some of Coles’ smaller suppliers .... Indeed, their lack of size was one of the reasons why they were classified as Tier 3 Suppliers and targeted by Coles. These vulnerable suppliers were up against Coles - the second largest retailer of grocery products in Australia. It is unsurprising that Coles admits that it had substantially stronger bargaining power. It is difficult to envisage circumstances involving a larger disparity in bargaining power.

103 Coles’ conduct was also serious because the admitted unconscionable conduct was difficult for the ACCC to detect due to the reluctance of smaller suppliers to report complaints about, and assist the ACCC with investigations into, the conduct of major retailers, when they rely on these retailers for the ongoing viability of their businesses. The contraventions also showed a failure of Coles’ internal compliance systems and processes, which had the potential to impact a number of suppliers with whom representatives of Coles had dealings.

104 Coles’ misconduct was serious, deliberate and repeated. Coles misused its substantial bargaining power. Its conduct was “not done in good conscience”.

105 Coles accepted that in its dealings with the five suppliers it treated them in a manner inconsistent with acceptable business practice, was not respectful of the suppliers’ needs for full and timely transparency, and nor did it properly respect the responsibility attached to Coles’ bargaining power.

106 The ACL provides for significant penalties for these contraventions. It is a matter for the Parliament to review whether the maximum available penalty of $1.1 million for each contravention of Pt 2-2 of the ACL by a body corporate is sufficient when a corporation with annual revenue in excess of $22 billion acts unconscionably. The current maximum penalties are arguably inadequate for a corporation the size of Coles.