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Formation of Woolworths Limited

Question:

Write an essay about the Woolworth’s Supermarkets.
 

Woolworths Supermarkets was the initiate of an Australian company called Woolworths Limited. Woolworth Limited was founded in the year 1924 in the month of September in Australia under the name of "Wallworths Bazaar Ltd". The original name of Woolworths Limited was inspired by the name of a very famous and globally recognized play author named F. W. Woolworth. At the time of formation, the company released that the said name of not registered in Australia and as the company at the time of formation had no plans for expansion outside Australia, the company registered the name “Woolworths Limited” on 22 September 1924 (Smith, Lawrence and Richards 2010). As soon as the company name was registered, the company opened its first Bargain Basement in the Pitt Street in the city of Sydney in Australia. The founders of the Woolworths Limited were Cecil Scott Waine, Harold Percival Christmas, George William Percival Creed, Stanley Edward Chatterton and Ernest Robert Williams. Initially, the founders and shareholders were not very keen on rushing up with the growth of the brand. However, as the bargains of the business continued and more capital was brought by the shareholders, the Woolworth Limited grew drastically and the dividends paid by the Woolworths Limited grew from 5% to almost 50% by the end of the third financial year (Dunford et al 2011).

Thus, right from 1924 Woolworths Limited has initiated the concept of selling good quality consumer products under one roof at affordable prices. The first advertisement of the Woolworths Supermarket was “Every man and women and children need a handy place where good things are sold at affordable prices” (Williams et al 2010).

As the business of the company grew, and an offer of a very inexpensive premise lead to the second store of Woolworths Supermarket in the year 1927 making Woolworths Supermarket a chain. By this time, the Woolworths Supermarket had started selling a variety of consumer products like plates, cups, sixpenny, toiletries, beauty, jar of Vaseline and health products. The brand of Woolworths Supermarket started becoming more popular and in 1929, the Australian Supermarket opened its first store in New Zealand. Shortly, the expansion of the Woolworths Supermarket was exceptional leading to a Woolworths Supermarket in every state in Australia. By the end of 1930, three were sixteen Woolworths Supermarket stores all across Australian cities like New South Wales, Western Australia, Queensland and New Zealand. In the year 1937, Woolworths Limited started advertisement through radio along with the regular advertisement which was initially done with newspaper (Keith 2012). In the year 1955, Woolworths Limited developed a new concept of self-service stores for the first time and by the year 1957; they introduced the first food store or supermarket in Australia changing the traditional way of buying everyday consumer products and making the concept of supermarkets popular. In the years 1959, there were almost 300 Woolworth store in Australia and New Zealand and in the year 1960, the concept of supermarkets received phenomenal appreciation, bringing great success in the business of Woolworths Limited and Supermarkets making Woolworths Limited, the widest Australian retailer. After 1960, the expansion of Woolworths Limited and its supermarket has been outstanding which includes the supermarket starting to sell liquor, starting their own brand of products, etc (Mitchell et al 2010).

Expansion and growth of Woolworths Supermarket

Thus, eventually, the Woolworth Supermarket became one of the biggest retailer chains in Australia. In the present time, there are approximately 961 Woolworth’s supermarkets in almost all cities and all across Australia and New Zealand. The Woolworths Limited has employed around 111,000 employees and relies on the same for their distribution, in store and support office. The Woolworths supermarkets are associated with various Australian farmers that supply to it ensuring that the best of the products which are sold in their stores (De Roos and Katayama 2010). The Woolworths claim to outsource at least 96% and 100% meat available in their stores from Australian framers. The Woolworths supermarkets deal with a number of consumer products like fruits, vegetables, liquor, clothing, home ware and beauty and health products, etc. Additionally, the Woolworths Limited also engages in providing financial services, personal loans and car insurance services.

The Australian company named Woolworths Limited was established with a small capital of 25,000 shares costing £1 each. The prospectus of the company showed the company’s name to be ‘Woolworths Bazaar Ltd’ which was later changed as Woolworths Limited as the companies in United Kingdom and United States of America with the said names had no plans for expanding to Australia. Initially, out of the 15,000 shares offered to public, only 11,707 shares were subscribed by a handful of 29 people who were mostly the relatives and friends of the founders. In spite of the unsuccessful initial public offer of company’s shares, the store established by the company was an immediate hit which provided 5% dividends in first year and 40% and 50% in the following years respectively. Thus, the structure of the Woolworths Limited was a private company limited by shares which was incorporated in Australia in 1924 and since then has expanded to become one of the biggest retail outlets in Australia (Crowley and Larsen 2010). 

Since the business of Woolworths Limited grew drastically after its incorporation, it is obvious that the said company faced many legal issues in its successful story. Thus, Woolworths Limited faced a number of legal suits against them relating to different laws like company law, contract law, consumer protection, torts, etc. However, some of the legal issues faced by Woolworths Limited are discussed as follows:-

A legal issue was faced by the Woolworths Limited concerning the Liquor Control Act 1988 in Western Australia. The case was Woolworths Limited v Commissioner of Police. In the said case, the Woolworths Limited applied for a license for a conditional grant of availing liquor in their new store in Dan Murphy’s South Fremantle. The said application was advertised for public comment and according to the section 69 of the Liquor Control Act 1988; a Commissioner lodged a notice of intervention and denied the issue of liquor license to Woolworths Limited. Thus, Woolworths Limited appealed against the decision of the Liquor Commissioner and stated that the said denial of license was against the procedural fairness. Thus, the Court of Appeal after reviewing the matter granted the desired conditional liquor license to Woolworths Limited and the matter was in favor of Woolworth Limited (Aplin et al 2012).

Woolworths Limited as one of the biggest retailer chains in Australia

Another legal issue which the Woolworths Limited faced related to tort law in Australia. Tort law in Australia usually discusses negligence on part of the plaintiff. Thus, in Woolworths Ltd v Ryder [2014] NSWCA 223 the Courts in Australia discusses the liability which a retail owes to the public in large visiting its retail outlets. In the said case, Ms Tracy Ryde was shopping at the Westfield Shopping Centre outlet of the Woolworth supermarket when she slipped and fell injuring herself on a soapy residue which was spread all over a corner of the Woolworths supermarket store (Godfrey 2015). When the said lady sued the Woolworths Limited for her injury under tort law of negligence, the Woolworths supermarket showed a footage of the CCTV camera of the said incident which stated that the said soapy residue was a result of a child blowing bubbles with soap liquid in the said corner of the Woolworths store. In the preliminary hearing, the judge held Woolworths Limited, which was the defendant in the said case liable for the injury stating that the defendant owed a duty of care towards the plaintiff against the dangers and the risk which arose out of the products which were sold in the retail store. However, when the said decision was appealed, the decision of the preliminary judge was overruled stating that the retailer in Australia does not owe any duty of care to prevent the dangers and risks that are created by the usage of the products which are purchased from the said retail store (Robertson 2014). The judge in the said case stated the following:-

  • Forseeability of a risk or harm is not sufficient to impose a duty of care to take precautions to prevent the risk from happening
  • A retailer in Australia is not liable to for the customers that use the products purchased by them in situations which give rise to any risk or harm
  • The duty of care by retailers fails to exist outside the premises of their retail stores (Angyal 2011).

Another, important legal issue which the Woolworths Limited faced relating to tort law and labor law is in the case Woolworths Limited v Perrins. In the said case, the Australian Courts considered the issue concerning the negligence of employers towards their employees and labor laws in Australia. In he said case; Trevor Perrins was an employee of the Woolworths Limited Company. When the said employee was hired, he failed to make any announcements or declaration about his past sexual and drug abuse and failed to mention about the medicinal treatment he was undergoing when signing the employee procedural forms. Eventually in 2008, Trevor Perrins applied to participate in a management training programme, however the Head Human Resources manager just before the management programme was about to start realized that Trevor Perrins had breached certain company policies which deny him from being eligible for the said management programme. Again next year in 2009 the Trevor Perrins was denied enter in the management programme which leads to Trevor Perrins falling sick and eventually being diagnosed with psychiatric illness (Van Caenegem 2011). Thus, Trevor Perrins sued Woolworths Limited for unreasonable management action. The Australian Court in the said case stated that a an employer can be as unreasonable as he pleases unless it breached its duty of care, thus, in the said case the court found no risk or injury of the Trevor Perrins against which Woolworths had to guard. Thus, in the said case, the decision was given in favor of Woolworths Limited and Trevor Perrins was ordered to pay Woolworths Limited the cost of the said trail and proceedings. 

Wide range of consumer products available in Woolworths Supermarkets

There is no business which can survive without any legal issues in relation to contract laws and consumer protection laws if the said business deals with manufacturing and retailing of consumer products. Thus, even Woolworths Limited has faced several litigation in relation to contract laws and consumer protection laws in Australia. Some of these cases are summarized as follows:-

In a case law against Woolworths Limited, the Australia Courts considered the provisions of the Trade Practices Act 1974 in Australia. Thus, in EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172, the Australian Court considered the importance of disclosure of true facts in all commercial dealings and negotiations where the said disclosure is expected to be made and the consequences of non-disclosure and silent are extreme. In the said case, Woolworth desired to start a supermarket in Auburn in the New South Wales. Since 1995, the Woolworths Limited was in talks with a third party in relating to a site for the said store in Auburn (Richards et al 2012). In 1998, a developer in Auburn named EK Nominees started negotiating with Woolworths Limited for the said premise for store. EK Nominees was aware that Woolworth Limited was negotiating for a Queen Road Site and made Woolworth Limited sign a form that their interest in Auburn Street is genuine. However, eventually, there was a meeting of Woolworth officials with EK Nominees employees to set a plan to establish a store in Auburn street. In 2000, a lease agreement was made for Auburn Street site, however, it required board approval which took time and meanwhile EK nominees invested money to execute the store plan. However, in 2002 a third party approached Woolworths Limited for the Queen Street site which Woolworth Limited was considering and failed to disclose the same to EK Nominees. Eventually, Woolworth limited proceeded with the Queen Street site, thus EK Nominees sued Woolworths Limited for violation of section 52 of the Trade Practices Act 1974. Thus, in the said case, the Court decided that failure on par of Woolworth Limited from disclosing that they no longer intend to lease the Auburn Street site was violation of section 52 of the Trade Practices Act 1974 and stated that EY Nominees was entitle to be compensated for their wasted expenditure amounting to $738,782.98 which Woolworth is liable to pay (Solomon, Russell-Bennett and Previte 2012).

Another legal issue which Woolworth Limited faced was related to restraint in trade under the contract law in Australia. In Woolworths Limited V Mark Conrad Olson, Mark Conrad was an employee of the Woolworth Limited who was hired on contractual basis for a project, which contained some important confidential information about the company. After the completion of the project, Mark Conrad was hired by a competitive company. Mark Conrad was dismissed for sending some confidential information to outside sources breaching his confidentiality duty. However, the contract Woolworth Limited had signed with Mark Conrad restricted him to work with any competitor for a period of 6 months. Thus, in the said case, the Australian Court stated that the restraint on an employee was for a legitimate reason which was to protect confidential business information and thus, the restraint on an employee to work in competitive company for a period of time was reasonable and valid under the Restraint of Trade Act 1976 (Gans and King 2014).

Employment and association with Australian farmers

Another major legal issue which Woolworth Limited faced was in connection with the Australian Competition and Consumer Commission who sued Woolworths Limited for unconscionable conduct while trading. Thus, in the Australian Competition and Consumer Commission v Woolworths Limited, the Australian Competition and Consumer Commission initiated a legal action against Woolworths Limited alleging that the said supermarket chain has engaged in unconscionable conduct while dealing with many of its suppliers to boast Woolworth’s profits. The allegations against Woolworths Limited was that they developed and adopted a scheme which the top management of Woolworths Limited approved to acquire payments from a certain group of suppliers to reduce the said supermarket’s half yearly profits. The allegation went ahead to state that Woolworths Limited used its superior position in making the suppliers make such payments for their benefits. There the Australian Competition and Consumer Commission plead to the Federal Court to grant an injunction which includes the order to refund all the payments taken by the group of Woolworth’s suppliers along with a penalty and declaration including the cost of the trail. However, the said case is a very recent and investigation is being carried out by the Australian Competition and Consumer Commission of the supplier agreements and arrangements of Woolworths Limited and the first hearing is set in February 2016. 

It is very evident that Woolworth Limited since its incorporation has faced many legal issues in relation to tort laws, negligence, consumer protection, contract law, labor laws, etc. For a successful business it is important to have a strategy to avoid, minimize and to deal with ongoing and future legal actions which are raised against the company. Thus, few recommendations which Woolworths Limited can follow to avoid and minimize legal actions:-

  • The Woolworths Limited should adopt a strict product safety policy where they claim that the products sold by them are safe and healthy. Moreover, the policy should also suggest what actions can consumers take I a product purchased by them is defective. Additionally, a product which has crossed its expiry date should not be sold. This policy and following the said regulations will help Woolworth Limited avoid many consumer protection cases.
  • Since Woolworths Limited is a private company limited by shares in Australia, it needs to ensure that it complied with all the rules and regulations made under the Corporation Act 2001. For example, Woolworths Limited needs to comply with the continuous disclosure rules that are set under the Corporation Act 2001. Complying with the rules and regulations of the Corporation Act 2001, Woolworths Limited will avoid cases that are brought about against it for breach of rules and regulations under the Corporation Act 2001. Thus, Woolworths Limited can issue a corporate governance hand-book (Keith 2012).
  • Additionally, the Woolworth Limited needs to display in all its supermarkets and stores disclaimers that they are not responsible for mishaps due to usage of purchased products. The said exclusion clause needs to be written in bold letters and be displayed in all supermarkets which will help Woolworths Limited avoid negligence legal action against them.
  • Since environment laws in Australia are very strict, Woolworths Limited is advised to maintain a strategy which follows and complies with all environmental laws in Australia. Since, Woolworths Limited has set not suffered any losses or legal action against environmental related issues, it should keep in mind to comply with the same to avoid future legal actions.
  • The most critical legal issue which Woolworth is currently facing is with the Australian Competition and Consumer Commission who accuse that Woolworths Limited has engaged in unconscionable conduct while trading with its suppliers. In the said case, Woolworths made admissions of certain allegations made by the Australian Competition and Consumer Commission; however, they claimed their actions to be regular business transactions. Thus, it is advisable that Woolworths Limited has a proper and a well –drafter legal contract with all its suppliers and vendors to avoid such legal issues in future. A contract with the supplier could help Woolworths state that they are complying with the terms of the contract, if it had one, in such circumstances.

Thus, by following the said recommendations, Woolworth Limited can avoid and at the same time tackle legal issues against the company with planning, strategy and diligence. Thus, having set contracts and policy will help Woolworth Limited to avoid maximum future litigation and legal issues against the company. 

Reference List 

Angyal, S.C., 2011. The Ethical Limits of Advocacy in Mediation.

Aplin, T., Bently, L., Johnson, P. and Malynicz, S., 2012. Gurry on breach of confidence: the protection of confidential information. OUP Oxford.

Crowley, M. and Larsen, A.C., 2010. Morality and Police Conduct: a way forward for ethical policing. In Forum on Public Policy: A Journal of the Oxford Round Table.

De Roos, N. and Katayama, H., 2010. Retail petrol price cycles in Western Australia. unpublished paper, University of Sydney.

Dunford, E.K., Eyles, H., Mhurchu, C.N., Webster, J.L. and Neal, B.C., 2011. Changes in the sodium content of bread in Australia and New Zealand between 2007 and 2010: implications for policy. Med J Aust, 195(6), pp.346-349.

Gans, J.S. and King, S.P., 2014. Supermarkets and shopper dockets: The Australian experience. Australian Economic Review, 37(3), pp.311-316.

Godfrey, B., 2015. On appeal: Court of appeal-judgments 1-31 October 2015.Proctor, The, 35(11), p.45.

Keith, S., 2012. Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, pp.47-81.

Mitchell, A., Kristiansen, P., Bez, N. and Monk, A., 2010. Australian organic market report 2010.

Richards, C., Lawrence, G., Loong, M. and Burch, D., 2012. A toothless chihuahua? The Australian Competition and Consumer Commission, neoliberalism and supermarket power in Australia. Rural Society, 21(3), pp.250-263.

Robertson, A., 2014. Three Models of Promissory Estoppel.

Smith, K., Lawrence, G. and Richards, C., 2010. Supermarkets’ governance of the agri-food supply chain: is the ‘corporate-environmental’food regime evident in Australia?. International Journal of Sociology of Agriculture and Food, 17(2), pp.140-161.

Solomon, M., Russell-Bennett, R. and Previte, J., 2012. Consumer behaviour. Pearson Higher Education AU.

Van Caenegem, W., 2011. Did a former employee misuse confidential information? Issues in the case of Bluescope Steel Ltd v Kelly. Australian Intellectual Property Law Bulletin, 20(6), p.90.

Williams, J., Memery, J., Megicks, P. and Morrison, M., 2010. Ethics and social responsibility in Australian grocery shopping. International Journal of Retail & Distribution Management, 38(4), pp.297-316.

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