Last year the ACCC prosecuted Coles for unconscionable
conduct over its dealings with suppliers. The ACCC alleged that
Coles bullied suppliers into submitting to trading terms that
unfairly favoured Coles, often at significant expense to the
supplier. The latest news is that Coles has consented to court
orders that it pay $10 million in penalties.
$10 million is a pretty big number. And notwithstanding
Coles' consent, the judge gave careful consideration to the
appropriate scale of penalties. (A 140 page consent judgment has to
be a record.)
The thing is, we reckon $10 million wasn't anywhere near
enough. Here's why.
At the outset, the ACCC opted to pursue penalties for
unconscionable conduct rather than misuse of market power.
Unconscionable conduct was the easier case to win. But the maximum
penalty per contravention is just $1.1 million, compared to $10
million for misuse of market power. The judge even noted that Coles
had 'misused its substantial market power', perhaps
suggesting that she would have liked to see the ACCC run the more
difficult case too.
The judge described Coles' conduct as 'serious,
deliberate and repeated'. Had the ACCC toughened up and run a
misuse of market power case, Coles could have been looking at $100
million in penalties rather than $10 million.
The judge also noted that the maximum penalties for
unconscionable conduct were 'arguably inadequate' for a
company the size of Coles. We agree. Coles' operating revenue
last financial year was $37.4 billion. Its profit was over $1.6
billion. (And that's not all of Wesfarmers, that's just
Coles.) At that rate we doubt the staff biscuit budget suffered for
the extra $10 million expense.
The penalties arose from Coles' conduct toward just a
handful of suppliers who decided to come forward and participate in
the prosecution. There are over 200 potentially affected suppliers
altogether and Coles has had to set up of a formal process for
those suppliers to seek redress. That means the other suppliers can
get their money back, but that Coles isn't exposed to pecuniary
penalties for those additional contraventions.
The ACCC claims the case as a big win. But given the above, it
kind of looks like Coles was the real winner.
We do not disclaim anything about this article. We're
quite proud of it really.
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