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Woolies win in ACCC supplier payments case

AAP logoAAP 8/12/2016 Petrina Berry

Woolworths has been cleared of acting unlawfully by asking for extra payments from suppliers in a federal court decision that has angered a peak food and grocery body.

The Australian Competition and Consumer Commission's (ACCC) took legal action against the supermarket giant over its Mind the Gap scheme, which required additional payments from suppliers to help Woolworths reach its profit targets.

Woolworths raised about $18 million in Mind the Gap payments from suppliers in December 2014, relating to the four months to October that year, in an effort to meet half-year targets.

But Justice David Yates dismissed the ACCC's allegations that Woolworths had breached consumer law and behaved unconscionably.

"I'm not satisfied Woolworths has contravened section 21 of the Australian Consumer Law as alleged," he said in his judgement.

The Australian Food and Grocery Council says the judgement will have lasting negative ramifications for the sector.

"It sends a terrible message when a practice that's tantamount to extortion is deemed acceptable and normal business practice," the group's chief executive Gary Dawson said.

Justice Yates said he could not conclude that there was a substantial difference in bargaining power between Woolworths and some of its smaller suppliers.

"It may be that some would see Woolworths' conduct in making 'asks' (requests to suppliers for payments) and seeking 'payments' as unjustified, unfair or unjust according to their own standards of commercial propriety," Justice Yates said.

However, he concluded that that was not the standard required to comprise a breach of Australian consumer law.

He said approaches made to suppliers under the Mind the Gap scheme were not unusual and were typical of Woolworths' dealings with various suppliers.

The ACCC's submission that the Mind the Gap scheme was "a speculative scheme designed to take advantage of vulnerable suppliers ... is not supported by any evidence," he said.

Woolworths said it was pleased with the decision, which accepted all evidence from Woolworths' witnesses and rejected all 13 of the ACCC's allegations of unconscionable conduct.

"We defended the case because we firmly believed we did not act unconscionably and we did not break the law," Woolworths Chief Legal Officer and Company Secretary Richard Dammery said.

ACCC chairman Rod Sims said the regulator would consider the judgement.

"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," he said in a statement.

"If you're a supplier subject to arbitrary demands, it's very hard to make future investment decisions in the face of financial uncertainty."

The ACCC has been ordered to pay a portion of Woolworths legal costs.

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