Supermarkets in the gun

Suppliers have been complaining for years that the two supermarket chains were using market power to bully them over prices and supply.
Suppliers have been complaining for years that the two supermarket chains were using market power to bully them over prices and supply.

THE power of Australia's supermarket giants, Coles and Woolworths, is under attack from the nation's most powerful competition regulator, which is investigating accusations they used improper practices to force down prices paid to suppliers.

The head of the Australian Competition and Consumer Commission, Rod Sims, will investigate the retailers - which control an estimated 70 per cent of the nation's grocery spending - for potential breaches of the law and bullying tactics against food and grocery suppliers.

In almost a mirror of the current crisis and investigation facing Australia's national sporting codes by federal crime authorities, the ACCC has warned it will use its compulsory information powers to gather the evidence it needs.

It comes as Wesfarmers, the conglomerate that owns Coles, yesterday confirmed to Fairfax Media that it had pushed Coles executives to further investigate accusations of misuse of market power when dealing with its own suppliers, ensuring compliance systems were not breached by any one of Coles' 100,000 employees.

''We are doing our own investigations and obviously the ACCC is doing its and we will just let it all unfold,'' Wesfarmers head Richard Goyder said.

But he also suggested the renewed attention from the ACCC might be politically linked.

''I'm not surprised given what he [Mr Sims] said to Senate estimates in the past, and we are moving into an election year and there's lots of noise so in a sense I'm not surprised,'' Mr Goyder said.

Meanwhile, about 50 suppliers have responded to the ACCC's call to come forward with evidence of unconscionable behaviour, under the promise of protection of their identity.

Suppliers have been complaining for years that the two supermarket chains, which last year had combined revenue of more than $70 billion from their Australian stores, were using market power to bully them over prices and supply.

The ACCC chairman launched a blistering attack on the supermarkets before a Senate estimates committee in Canberra late on Wednesday night, when he laid out the accusations against the supermarkets.

The allegations include:

■Persistent demands for additional payments from suppliers beyond that negotiated to get its product into the store.

■The imposition of penalties that did not form part of any negotiated terms of trade, and which apparently do not relate to actual costs incurred by the major supermarket chains.

■Threats to remove products from supermarket shelves or otherwise disadvantage suppliers if claims for extra payments or penalties are not paid.

■Failure to pay prices agreed to with suppliers.

■Conduct discriminating in favour of home-brand products.

Mr Sims said that during the ACCC's meetings with these suppliers their allegations were consistent.

''They largely told us of behaviour that had a high degree of consistency in many respects.''

Ominously, Mr Sims said these allegations were ''subsequently illuminated'' in what the ACCC had discovered to date.

''The ACCC has therefore, begun the resource-intensive task of acquiring further information using our compulsory information powers from a range of suppliers and, importantly, in the main not just from those suppliers that have approached the ACCC.

Mr Goyder said on Thursday Coles had internal processes to ensure it acted in a responsible and ethical way with its suppliers, with staff reminded through extensive corporate literature on how to behave.

He said following widespread discussion last year about the power of the supermarkets, especially coming out of Parliament, he pushed Coles to re-check its compliance.

''Then what I said to the people at Coles was I want you to have a good look what's going on, make sure we are not doing anything inappropriate.''

Claire Kimball, a spokeswoman for Woolworths, said: ''Woolworths has a very strong focus on ensuring its business dealings are fair and lawful, while delivering low prices for our customers. We have complied with ACCC requests in this space last year but have not received any further update from them.''

This story Supermarkets in the gun first appeared on The Sydney Morning Herald.