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.