The Federal Court has dismissed proceedings brought by the ACCC against Woolworths, in which the commission had alleged the retailer had engaged in unconscionable conduct in its dealing with a large number of its suppliers.
In December 2014, Woolworths developed the ‘Mind the Gap’ scheme to reduce a significant half-year gross-profit shortfall, with category managers and buyers contacting many suppliers to ask for urgent payments ranging from $4,291 to $1.4 million.
The Federal Court ruled that Woolworths’ requests for these payments were not unconscionable within the meaning of the Australian Consumer Law.
Justice Yates noted the complex trading relationship between Woolworths and its suppliers and that this is always under negotiation and, depending on circumstances, constantly changing.
ACCC Chair Rod Sims said the commission took this action because it considered that Woolworths’ behaviour went well beyond hard commercial bargaining and was not consistent with business and community values.
“If you’re a supplier subject to arbitrary demands, it’s very hard to make future investment decisions in the face of financial uncertainty,” he said.
“The ACCC will carefully consider the judgement. Pursuing unconscionable conduct remains an important area for the ACCC and we will continue to take enforcement action where appropriate, particularly in relation to supply-chain issues.”
Australian Food & Grocery Council CEO Gary Dawson says the judgement will have lasting negative ramifications for the food and grocery sector.
“It sends a terrible message when a practice that’s tantamount to extortion is deemed acceptable and normal business practice,” he said.
“The pressure is now on Woolworths to make good on their claim that they have changed and will honour their commitments under the [Food and Grocery] Code of Conduct, which clearly prohibits these sort of retrospective claims under threat of retribution.
“We welcome the commitment from Woolworths’ senior management that practices like retrospective profit-gap demands won’t be repeated and we remain committed to working with Woolworths to improve trading relationships through their supply chain.”
