Australian Consumer Law: Analysis of ACCC v Woolworths & Coles Cases

This report provides a legal analysis of the cases ACCC v Woolworths Limited [2016] FCA 1472 and ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405, focusing on the implications of Australian Consumer Law (ACL), particularly Section 21 regarding unconscionable conduct. The report examines a scenario involving a 'Special Suppliers Club' and assesses whether the conduct of the business could be deemed unconscionable. The analysis draws parallels between the described program and the legal findings in the Coles and Woolworths cases. It highlights the misuse of bargaining power, unfair treatment of suppliers, and potential misleading or deceptive conduct under Section 18 of the ACL. The report offers advice based on the court's rulings, emphasizing the importance of fair commercial dealings and the potential risks associated with pressuring suppliers. It concludes with recommendations to avoid actions that could be considered unconscionable under the ACL and references the relevant legislation and case law. The document is prepared for Ms. Melissa Rogers, Legal Compliance Officer at Munchkins R Us, and provides legal advice concerning the implications of the ACL on a proposed business program.

Running head: ACL
Australia Consumer Law
Name of the Student
Name of the University
Author’s Note

1ACL
[#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

2ACL
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.
Our advice to you is based on these instructions.
Advice:
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

3ACL
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

4ACL
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.
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

5ACL
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

6ACL
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#]

7ACL
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)