Australia’s supermarket giants, Coles and Woolworths, are under attack from the competition watchdog, which is investigating claims they used improper practices to force down prices paid to suppliers.
The head of the Australian Competition and Consumer Commission, Rod Sims, told the Senate estimates committee the watchdog will investigate the supermarkets.
Sims said 50 suppliers have come forward confidentially with claims and said the ACCC will investigate whether the major supermarket chains are engaging in unconscionable conduct in their dealings with their suppliers and whether they are misusing their market power by discriminating in favour of their own home brand products.
Sims said the suppliers all told similar tales of abuse.
“They largely told us of behaviour that had a high degree of consistency in many respects,” he said.
Sims said the ACCC would investigate persistent demands for additional payments from suppliers above and beyond those negotiated, the imposition of penalties on suppliers, threats to remove products from supermarket shelves and conduct discriminating in favour of home brand products.
“Now that we understand the broad nature and context of the alleged conduct, it is evident that, if fully put to proof, this conduct may constitute a breach of the Act and so it is now being investigated in even more detail,” Sims said.
Sims called for an enforceable code of conduct for supermarkets and warned he would use its compulsory information powers to gather the evidence it needs.
Suppliers have been complaining for years that Coles and Woolworths, which last year had combined revenue of more than $70 billion, have been using market power to bully them over prices and supply.
Speaking yesterday as he revealed Coles’ profit had surged in the first half of the year, Wesfarmers chief Richard Goyder confirmed the supermarket was being investigated by the ACCC.
“We are doing our own investigations and obviously the Australian Competition and Consumer Commission is doing its [investigation] and we will just let it all unfold,” he said.
He disputed Sims’ suggestion Australia needed an enforceable code of conduct for supermarkets in their dealings with suppliers.
“What I don’t support is bureaucracy,” he said
A spokesperson for Woolworths told SmartCompany the supermarket has a “very strong focus” on ensuring its business dealings are fair and lawful.
“We have complied with ACCC requests in the space last year but have not received any further update from them,” she said.
She said Woolworths is “working constructively” with the other major retailers, and food and grocery manufacturers on the establishment of an industry code.
Small business says it is about time. Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany the duo’s treatment of small business was inhibiting the economy.
“It has got to happen, this is for the economy as much as it is for the suppliers involved, it is very difficult for them to innovate and be productive when Coles and Woolworths are screwing them,” he says.
Strong says it is important that the ACCC has granted suppliers a guarantee of confidentiality to participate in the inquiry.
“At Coles and Woolworths, if you do complain and you are in the media they will destroy you, now they have a guarantee of confidentiality the ACCC will have a lot of case studies they can work with,” he says.
Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
