We “crossed the line”: Coles coughs up $10 million and an apology over supplier bullying allegations

Supermarket giant Coles has agreed to pay a $10 million penalty to resolve its ongoing court battles with the Australian Competition and Consumer Commission, admitting it pressured small suppliers to pay ongoing rebates.

After “categorically” denying the allegations in July, Coles released a statement yesterday admitting to two separate cases of unconscionable conduct towards its suppliers in late 2010 and 2011.

“Coles unconditionally apologises and accepts full responsibility for its actions in these supplier dealings,” Coles managing director John Durkan said.

“I believe that in these dealings with suppliers, Coles crossed the line and regrettably treated these suppliers in a manner inconsistent with acceptable business practice. We will await the Judge’s decision in these matters.”

The supermarket reached an agreement with the ACCC to pay a proposed penalty of $10 million, although the amount is still to be reviewed and cleared by the Federal Court in Melbourne. An admission of guilt was also part of the orders sought by the ACCC.

In July, Coles lodged a 34-page court defence of its Active Retail Collaboration (ARC) program, which asked around 200 suppliers for additional and ongoing rebates. The ACCC alleged that Coles’ target was to obtain $16 million from suppliers from this rebate. Coles had maintained participation to the program was at all times voluntary.

It yesterday admitted that “at times” during the negotiations of the ARC program, it “fell considerably short” of its best practice business standards and “the reasonable expectations of suppliers”.

“Coles has identified with the ACCC, dealings with a number of suppliers where its conduct was unacceptable and has made a number of admissions,” said the supermarket.

“In these particular dealings, Coles was not respectful of supplier needs for full and timely transparency, and of the responsibility attached to Coles’ bargaining power.”

Coles said it has addressed this imbalance with its August appointment of former Victorian premier and active Coles critic Jeff Kennett as an independent arbiter of its supplier dealings.

The supermarket, with the help of Kennett, will assess whether compensation for the suppliers is appropriate.

The grocery giant also admitted to unconscionable conduct in regards to its communications and negotiations with five suppliers over late delivery, waste and profit gaps.

Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany the settlement was good news for small suppliers.

“This is what we’ve known for a long time. There has been at least a decade of this behaviour by Coles, but also others,” says Strong.

Strong says he hopes the penalty will lead to a change in the standard of conduct towards small suppliers.

“Sure, they’ll pay the fine, but will they change? Admitting is good, but they need to do something about it, something real,” Strong says.

“They are a big organisation, so they need to bring in a system that sends the message out to all their people.”

Strong says COSBOA will endeavour to meet with Richard Goyder, head of Coles’ parent company Wesfarmers, to offer its assistance to set up such systems.