Coles should repay money to suppliers

16 December, 2014

Parliamentary Secretary to the Minister for Agriculture, Senator Richard Colbeck, welcomed an announcement that Coles will take full responsibility for unconscionable conduct that is the subject of an ACCC proceeding.

Coles has admitted to unconscionable conduct in relation to certain dealings in late 2010 and 2011 with suppliers and said they "crossed a line and regrettably treated these suppliers in a manner inconsistent with acceptable business practice."

Senator Colbeck said the confession of wrong doing should lead to a change in behaviour and all major supermarkets should measure and report publically on levels of supplier satisfaction as part of their corporate social responsibility.

"Issues of unconscionable conduct were raised during the Senate Select Committee inquiry into Australia's Food Processing Sector in 2011/12. In fact, Coles were directly confronted by Senators about the alleged behaviour and stated they were unaware of it happening in their business," Senator Colbeck said. (See attached Hansard extract from the Select Committee on Australia's Food Processing Sector)

"The Committee report recommended the major supermarkets voluntarily compile and establish benchmarks to measure the level of supplier satisfaction and engage external agencies to conduct regular supplier satisfaction surveys and publicise the results in the supermarkets' regular reporting cycles."

Senator Colbeck said the Committee investigated suppliers' concerns regarding Coles paying discounted prices without prior discussion or negotiation.

"At the time Coles told us that all negotiations with suppliers took place in advance," he said.

Mr John Durkan, then Merchandise Director for Coles, stated that "none of our negotiations are retrospective. They are all in advance. We have to agree with any changes to our supply price with our suppliers in advance". (Select Committee on Australia's Food Processing Sector Hansard 15 May 2012 p.13)

When asked what Coles would do if it was found to have acted unconscionably, Mr Durkan said: "If we had asked for money, we would repay that money."

"I encourage Coles to uphold that promise and return money to suppliers," Senator Colbeck said.

Senator Colbeck reiterated the Committee's recommendation (recommendation 6) that:

"the major supermarkets in Australia voluntarily compile and establish benchmarks within their corporate social responsibility documents to measure the level of satisfaction of their suppliers in dealing with the supermarkets. External agencies should be engaged to conduct regular supplier satisfaction surveys, the results of which should be publicised by the supermarkets in their regular reporting cycles."

Hansard extract - Select Committee on Australia's Food Processing Sector - 15/05/2012

CHAIR: Absolutely. I am not even going to go to locality. This is a circumstance where a price rise has been approved for a product. A period of time passes. A call comes back from one of your buyers. 'The yield has dropped on your product' is what the call says. 'The product is not yielding what it should be yielding. We need you to compensate us for that loss of yield.' It was a considerable sum of money. The supplier did not agree. 'You've granted me a price rise. Your business is your business, but I've applied to you for a price rise. You've given it to me. Therefore, why should I give you your loss of yield? If you haven't managed your business properly to deal with that, that's your problem.' That was fine. Six weeks later, the product was delisted. It was no longer listed as a product.

I found that to be a very disturbing set of circumstances. It was asking for money retrospectively, and the perceived penalty was that the product was no longer there. Yet we have already discussed your price rise mechanisms. You have a process to deal with that. But the penalty is that you are no longer a client. Sorry to butt in, Senator Xenophon. Is that a fair summary?

Senator XENOPHON: I think that is a fair summary of the evidence we have heard.

Senator EDWARDS: 'And it'll cost you so much to come pick it up.'

Mr Durkan: I am not aware of that, and it is not something that we would condone in our business in any way, shape or form.

CHAIR: And we are not at liberty to give you the details. We took the specifics in camera, so we are dealing with that.

Mr Durkan: That is fine. I would not condone that in any way, shape or form. It would not be part of our--

CHAIR: But it has happened in your business.

Mr Durkan: I am clearly unaware of that.

161214 Coles should repay money to suppliers
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