South Australian suppliers will benefit from the Australian consumer watchdog’s legal action against supermarket giant Coles, says FoodSA’s chief executive.
“We have been in discussions with the Australian Competition and Consumer Commission since early last year,” Food SA’s Catherine Barnett told InDaily.
“A significant number of South Australian suppliers will have received notices from the ACCC in the mail today advising them of their part in the legal action.
“The background to it has been very interesting.”
Barnett’s organisation, which represents a broad cross-section of producers and processors, made its concerns known at a 2012 Senate inquiry into the power of the major supermarket chains.
The inquiry had its origins in the dairy industry’s milk price where the major supermarkets sold milk for just $1 a litre, a price that was far too low for most farmers.
“The Senate inquiry turned out to be a bit of a dud, but it did spark the interest of the ACCC,” Barnett said.
“They came and saw us and wanted information on how the major chains were putting the heat on suppliers.
“They then descended on Coles’ head office and took away millions of pages of documents.
“It related to a new computerized supply system that Coles had convinced suppliers to co-fund on the basis that it would improve their margins.
“There are a lot of South Australian businesses that have been caught up in this.”
The ACCC announced yesterday it has launched legal action in the Federal Court, accusing Coles of abusing its size and power to pressure 200 small suppliers into making the payments as part of an orchestrated effort to improve the company’s bottom line.
Chairman Rod Sims accused Coles of conducting a highly orchestrated campaign to extract rebates from suppliers, in recognition of benefits it claimed they had received from changes to the supermarket’s supply chain.
“We allege they used misinformation, used undue influence from their superior bargaining position, gave people only a day or two to pay up and overall were seeking money they had no legitimate basis to obtain,” he said.
Coles allegedly received about $16 million in payments a year from the suppliers, which range from the makers of nutrition products to pet food producers.
Sims said the ACCC was seeking an injunction against the payments in the federal court, along with fines against Coles that could run to millions of dollars.
Barnett believes the suppliers will get a result sooner rather than later.
“An action like this could do a lot of damage to Coles if there is consumer resistance,” she said.
“I expect they would be keen to settle out of court.
“If that happens it will be quite a win for South Australian producers and suppliers.”
Coles said yesterday it would fight the action, adding the changes to its supply chain benefits both suppliers and customers.
“Over the last five years, Coles has worked to significantly improve relationships with suppliers and to share the benefits of the strong growth in Coles customer numbers during this time,” it said in a statement.
“In fact, Coles’ support for Australian food manufacturing has never been stronger.”
But Sims said Coles’ treatment of its suppliers had been “unconscionable”.
“We argue this crosses a line,” he said.
“The allegations we’ve made, if proven, we argue would be stepping beyond the normal bounds of normal commercial behaviour.”
The Australian Food and Grocery Council and the Council of Small Business of Australia praised the ACCC’s move.
“This action by the ACCC sends a strong message to the supermarket and retail sectors,” Council of Small Business executive director Peter Strong said.
“It says that regardless of your size you will be held accountable for your actions and the affect this has on businesses everywhere.”
The case has been set down for a directions hearing in Melbourne on June 6.
– with AAP
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