The Australian Competition and Consumer Commission is proceeding against Woolworths Ltd before the Federal Court, claiming that the supermarket chain has engaged in unconscionable conduct in dealings with several suppliers. According to one of the allegations, Woolworths tried to reduce its expected profit shortfall by systematically seeking to obtain payments from 821 “Tier B” suppliers, to “support Woolworths”. The sums ranged from $4,291 to $1.4 million. In accordance to this scheme, called ‘Mind the Gap’ and allegedly approved by senior management, those who did not agree to the payments would have been seen as “not supporting”.
“A common concern raised by suppliers relates to arbitrary claims for payments outside of trading terms by major supermarket retailers. It is difficult for suppliers to plan and budget for the operation of their businesses if they are subject to such ad hoc requests,” said Rod Sims, ACCC Chairman.
The Commission stated that Woolworths took advantage of its stronger bargaining position and tried to collect approximately $60 million in Mind the Gap payments, eventually receiving more than $18 million from its suppliers. The first hearing is scheduled for next February.