On 5 May 2014, the Australian Competition and Consumer Commission (ACCC) commenced proceedings against Coles, alleging it had engaged in unconscionable conduct in relation to its Active Retail Collaboration (ARC) program.

The ACCC alleges that, in 2011, Coles developed a strategy to secure cheaper prices from suppliers through a variety of means, including through a rebate paid by suppliers to Coles.  The rebate was based on purported benefits to large and small suppliers that resulted from changes Coles had made to its supply chain as a part of its ARC program.

The ACCC alleges that Coles targeted $16 million in rebates from smaller suppliers, and was ultimately seeking an ongoing rebate as a percentage of the price it paid for the supplier’s grocery products. For smaller suppliers the rebate was referrable to the value of the supplier being able to access Coles’ supplier portal and, where applicable, a percentage based on the asserted value of Coles having changed its ordering patterns to order products in “economic order quantities”.

The ACCC alleges that Coles engaged in unconscionable conduct in breach of the Australian Consumer Law (ACL) by:

  • providing misleading information to suppliers about the savings and the value of the changes Coles had made;
  • using undue influence and unfair tactics against suppliers to obtain payment of the rebate;
  • taking advantage of its superior bargaining position by, amongst other things, seeking payments when it had no legitimate basis for seeking them; and
  • requiring suppliers to agree to the ongoing ARC rebate without providing them with sufficient time to assess the value, if any, of the purported benefits of the ARC program to their small business.

The ACCC is seeking pecuniary penalties, declarations, injunctions and costs.

The matter is listed for a directions hearing on 6 June 2014.