The Federal Court’s decision to dismiss proceedings brought by the ACCC against Woolworths regarding unconscionable conduct with suppliers has been labelled “disappointing” by the chief of the Council of Small Business of Australia (COSBOA).
According to the ACCC, Woolworths had engaged in unconscionable conduct in its dealing with a large number of its suppliers through its ‘Mind the Gap’ scheme, which was aimed at reducing a large half-year gross profit shortfall by the end of 2014.
“Category managers and buyers contacting many suppliers to ask for urgent payments ranging from $4,291 to $1.4 million,” the ACCC said in a statement.
The ACCC instituted proceedings in the Federal Court against Woolworths on 10 December 2015, seeking injunctions, including an order requiring the full refund of the amounts paid by suppliers under the Mind the Gap scheme, a pecuniary penalty, a declaration, and costs.
However, on 8 December 2016, the Federal Court dismissed the allegations, finding that Woolworths’ request for such payments were not unconscionable within the context of Australian Consumer Law.
“The ACCC took this action because we considered that Woolworths’ behaviour went well beyond hard commercial bargaining and is not consistent with business and community values,” says chairman, Rod Sims.
“If you’re a supplier subject to arbitrary demands, it’s very hard to make future investment decisions in the face of financial uncertainty.”
Sims says the ACCC will consider the judgement, noting unconscionable conduct remains an important area and the ACCC will continue to take enforcement action where appropriate.
The CEO of COSBOA, Peter Strong, has called the decision “extremely disappointing”.
“The decision suggests that the biggest businesses rule the landscape and will get what they want, when they want it, regardless of the cost to small and medium businesses,” he adds.
Strong claims the court decision “reinforces the fact that big businesses are holding back our innovators and damaging the economy”, pointing to a 2014 OECD report that found Australian SMEs are 5th most innovative in the world compared to Australian big businesses ranking of 21st in the world.
“How can we be agile and innovate when the biggest businesses Australia has ever seen can destroy innovative firms at their will due to their dominance and the lack of imagination of their boards?” Strong asks.
Strong is calling for more power to be given to the ACCC.
“It is time for the Australian Government to step up and take a lead on competition to support their aspirations for the largest employer of Australians – the small business sector – to give life to the Australian Government’s aspiration for a more innovative and productive economy,” he concludes.