Coles “categorically” denies bullying suppliers

Supermarket giant Coles has “categorically rejected” allegations it engaged in unconscionable conduct towards 200 of its small suppliers.

Although the company has previously defended itself against the legal action brought against it by the Australian Competition and Consumer Commission in May, Coles officially lodged a 34-page defence in the Federal Court in Melbourne yesterday.

In the latest development in the case, Coles has defended its Active Retail Collaboration program, which asked around 200 suppliers for additional and ongoing rebates.

The ACCC alleges the program breached Australian Consumer Law by providing misleading information to suppliers about the savings and value of the program; using undue influence and unfair tactics against suppliers to obtain rebates, and in some cases threatening commercial consequences when rebates were not paid; taking advantage of its superior bargaining position; and requiring its suppliers to agree to rebates without sufficient time to assess the value of the deal.

In a statement, Coles said supplier participation was at all times voluntary.

The supermarket chain also said it consulted with suppliers regarding the value of the expected benefits of the program and responded to supplier queries concerning those benefits.

Coles said it maintained trading relationships with suppliers irrespective of whether or not they decided to participate in the program, with 32 of the 200 suppliers not agreeing to participate in the program. The company said it continued a trading relationship with each of those suppliers.

Suppliers said to have been approached to join the program include Carman’s Fine Foods, Maggie Beer Products, Nudie Foods, Bic, Mattel, Weis Frozen Foods and Yakult, although none have been drawn to comment on the case.

Coles reportedly trained its category managers to talk to suppliers with the use of scripts that included a threat to delete those who did not pay up. Fairfax reports that in its submission, Coles did not deny the use of scripts to encourage suppliers to participate.

There has been much talk recently about major supermarkets unfairly squeezing suppliers, after Australia’s other big player, Woolworths, recently came under fire for asking its fresh fruit and vegetable suppliers to help fund its Jamie Oliver marketing campaign.

Master Grocers Australia chief executive Jos de Bruin told SmartCompany this morningin most cases suppliers don’t have a choice how they deal with Coles or Woolworths.

“Coles and Woolworths always have the upper hand,” says de Bruin.

He says while the big two supermarkets do give suppliers the advantage of stocking a volume of their products, they will often play suppliers off against one another and will rarely turn suppliers much of a profit.

“In most situation [small suppliers] say, ‘we deal with Coles and Woolworths to recover our overheads’, but we deal with independents for profit,” says de Bruin.

“We have all known about Coles and Woolworth’s tactics for years.”

De Bruin says the idea that a leading ASX-listed Australian company can have such legal action brought against it is astounding.

“And it’s telling that at least 50 small suppliers needed to be given confidentially to speak out about it,” he says.