Essay: Legal Implications Of ACCC V Woolworths And Coles Supermarkets Australia Pty Ltd Under Australian Consumer Law.

Discuss about the A latter for the Australia Consumer Law.

[#Date#]

[#Your name#]

[#Your address#]

Ms Melissa Rogers

Legal Compliance Officer

Munchkins R Us

[#Address#]

Dear Ms Rogers

Re: The legal implications of ACCC v Woolworths Limited [2016] FCA 1472; ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405

We refer to your request for advice regarding the legal implications of the two recent Federal Court judgments referred to above.

You advised us that you recently established a new ‘Special Suppliers Club’. In relation to the club you have sent invitations to all suppliers where they are required to $200 on a monthly basis in order to attain the membership of the club. In addition it has been provided by you that all suppliers who are able to gain the membership of the club would be entitled to receive ‘member benefits’ which consists of an annual Christmas party and monthly e-newsletter. However it has also been provided by you that those suppliers who do not become members of the club, their products would no longer be eligible for display in stores having high traffic or for promotion. In the given situation there are possibilities that your conduct may be regarded as an unconscionable conduct. This is because section 21 of the Australian Consumer Law given in Schedule 2 of the Australian Competition and Consumer Act 2010 prohibits a person in trade of commerce to indulge in a conduct which may be regarded as unconscionable. There is no precise and well defined definition of an unconscionable conduct, however section 22 gives out a few circumstances in which Unconscionable conduct may take place.  According to this section a unconscionable conduct may include the consideration of the seller and the buyer, whether the conditions which have been imposed by the seller is required reasonable to protect business interest, whether the document was understood properly by the buyer, whether the seller exerted any pressure or undue influence on the buyer and whether good faith was observed during the transaction. So in the given situation in case it is determined that the conduct which have been indulged into by you in relation to the club and the suppliers is unconscionable then you may be subjected to financial penalties.  The two most important cases the implications of which may be applied to determine your situation and derive appropriate advice as the case of Cole’s and Woolworth’s case as named above.

Legal Advice

Our advice to you is based on these instructions. 

In the case of ASIC v Coles it was found by the court that the defendant company indulged in a conduct which is unconscionable in nature with respect to the provisions of section 21 of the ACL. In the proceedings it has been stated by the court that misconduct of the defendant company was very serious, repeated and deliberate in nature. There was a misuse of bargaining power by Cole and the conduct which was indulged into was not in good conscience. The manner in which the company treated its suppliers were not in consistency with acceptable social and business standards applicable on commercial dealings. Here the organization had demanded payments from the suppliers which it had no right to claim by threating them of harm. In addition the company withheld money gained from the suppliers which it did not have any right to do. The proceedings which had been brought by the ACCC was in relation to the Active Retail Collaboration (ARC) program introduced by the company. The program had been introduced to enhance the earnings of the company. When a few supplier involved in the arrangement refused to provide payments in relation to the program the company made threats in relation to commercial consequences. Few of such consequences were that support would be withdrawn from the suppliers, only when agreement to pay is made certain ranging obligations would be provided by the company, promotional activity risks, not acquiring products from the suppliers and not providing the suppliers forecasting information which was provided previously. In addition the organization had more bargaining power as compared to that of the suppliers. The suppliers were also not given sufficient information and were also pressured in relation to assess or consider the benefits of the program in a very short period of time.

Therefore according to the circumstances which have been discussed in relation to this case it can be stated that the idea of the ‘Special Suppliers Club’ program by organisation may be subjected to similar consequences. This is because your program also includes asking for payments from the suppliers and that said that if the payments are not made out the suppliers fail to join the club they would not be entitled to promote their products in high traffic stores. The benefits which are provided so your program include monthly new-settlers and a yearly Christmas party. However there is an element of threat of subjecting the suppliers to detriment in case they do not choose to be a part of the club. According to the reasoning provided in the above case the threat which is given in an indirect manner to the suppliers in this situation may result in an unconscionable conduct under section 21 of the ACL. In addition under the provisions of section 18 of the ACL these actions may also be regarded as misleading or deceptive on which is likely to mislead or deceive. It may be held by the court that your organisation is using the greater bargaining power it may be held by the court that your organisation is using the greater bargaining power it has over the suppliers in order to exploit them and indulge in an unfair advantage trading.

ACCC v Coles Supermarkets Australia Pty Ltd

In the case of ASIC v Woolworths the question which that court had to determine was that whether the defendant organization indulged in an unconscionable conduct in the light of section 21 of the ACL. In this case the primary ruling of the court was that the organization did not indulged in a conduct which may be considered as unconscionable. In this case it had been ruled by the court that a “Mind The Gap” scheme introduced by the defendants through which they were to obtain payments form the suppliers did not constitute an unconscionable conduct.  The scheme had been implemented for the purpose of closing the gap between the targeted and the expected profit and sales. The scheme consisted of several measures for the purpose of enhancing the margin such as a performance management initiative.  The discretion of selecting the suppliers in relation to scheme was left on the managers. The allegation was majorly in relation to the implementation and design of the initiatives rather than asking the suppliers to make payments. On this ground the court distinguished the facts of this case with that of the Cole’s case where admission of a specific conduct in relation to the course of payment had been identified by the court. The ACCC in this case could not show that any supplier is affected because of the scheme. In addition it was found by the court that the scheme was not different to the regular course of dealing which the defendant company indulged into. Further it was held by the court that that defendant company did not require any contractual right to approach its suppliers. Thus the case implies that Unequal bargain do not always result in unconscionable conduct unless it is used. Gentility is not mandatory is relation to commercial dealings and the overall circumstances of the dealing needs to be analysed rather than a selective analysis. Unconscionability can only be established where leading evidence is obtained from a party involved in the arrangement. It had been provided by the court that where evidence from suppliers involved in the scheme is not present it is not possible for the court to analyse the overall circumstances of the transaction. The circumstances which were involved in this case are much different to the cole’s case. In the Cole’s case the scheme involved the words “asks” and also demanded payment in relation to the supply of goods in an earlier period.

The provisions of this case may have acted as a defence in relation to your program. However in this case the judge has expressly distinguished between what amounts to unconscionable conduct and what does not. Here there was no involvement on the part of the organisation to pressure the suppliers of making payment on the term or else they would be subjected to unfair detriment. The organisation indulgence in the program was no different to its regular course of dealing. However in your situation the company maybe held to pressure the suppliers by forcing them to contribute $200 every month towards the program in order to only get monthly new settlers and a Christmas party and if they do not do so they would not be able to get promotion in high traffic areas. This situation may meet the criteria which is required for the purpose of establishing in unconscionable conduct. A stronger case may be developed against you if any of the suppliers provide evidence that they have been affected by your program and have been forced through the virtue of low bargaining power to get into the agreement.

Our recommendation to you is to you should not carry on with your program based on the terms which you wish to. According to the Australian Consumer Law you are not allowed to pressure any person to get into an agreement because of a higher bargaining power held by you and by giving them threat that if they do not get into the agreement they would be subjected to specific detriments.

 If you have any questions or would like us to assist you in anyway please don’t hesitate to call our office.

Your sincerely,

[#Your name#] 

References

ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405

ACCC v Woolworths Limited [2016] FCA 1472

Australian Consumer Law, Schedule 2 of the Australian Competition and Consumer Act 2010 (Cth)