The Federal Court will decide, after Woolworths defends a controversial policy to extract $60 million in extra payments from suppliers.
The retail giant is in court this week fighting allegations of unconscionable conduct over is Mind the Gap scheme, under which it demanded extra payments from so-called tier two suppliers, to plug a $50 million hole in Woolworths’ profits in the second half of 2014.
The Australian Competition and Consumer Commission alleges that the retailer took advantage of its market power to make 821 suppliers fork out payments of between $4,291 and $1.4 million each, with four days’ notice.
Category managers or buyers would contact the suppliers using a prepared script supplied by superiors, who were under pressure to find ways to address the profit shortfall, the ACCC alleges in its statement of claim.
“If the supplier did not make the Mind the Gap payment to Woolworths, the supplier would not be supporting Woolworths,” the script allegedly said.
“Woolworths could only support those suppliers that in turn supported Woolworths.”
“We believe our conduct was consistent with Australian and international industry practice to engage regularly with suppliers over product and category performance,” a company spokesman previously said.
“Woolworths believes in working cooperatively with suppliers. Woolworths was the first major supermarket to agree to sign the Grocery Code of Conduct and is currently implementing the Code across its business.”
Seriously? Code of Conduct that says ripping suppliers is ok? Woolworths badly manages it’s business and suppliers are supposed to reinstate Woolworth’s profits? Imagine your plumber calling and asking for $500 more because he didn’t make enough profit?
Execs are obviously taking drugs if they think this is normal business practice.
Suppliers offer a product at a price. You buy or you don’t buy. A little haggling and it’s done.
What an audacious statement of entitlement by nasty and dishonest people.
Australian Government doing the same thing (See next post) and the USA ‘Equity sharing’ scheme where Police can seize anything you own and then split the proceeds with the Government without charges or a Court case.
“Just what is the World coming to?”