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Australia's Woolworths wins court case over supplier payments
December 8, 2016 / 6:18 AM / a year ago

Australia's Woolworths wins court case over supplier payments

SYDNEY, Dec 8 (Reuters) - Australian supermarket giant Woolworths Ltd won a court victory on Thursday against the competition regulator, as a judge dismissed claims the retailer had pressured suppliers to make payments to fund an earnings shortfall.

The Australian Competition and Consumer Commission (ACCC) accused Woolworths of seeking about A$60.2 million ($43.84 million) in payments from suppliers to help boost flagging earnings under a scheme the company called Mind the Gap.

The watchdog argued the scheme took advantage of Woolworths’ superior bargaining power against about 800 suppliers, in contravention of consumer law. It wanted Woolworths to refund suppliers and pay related costs.

But Federal Court Judge David Yates said the ACCC failed to prove that Australia’s No. 1 grocery chain had treated suppliers badly. Its case relied on emails and internal documents but lacked witnesses to explain supermarket-supplier relations, he said.

“It is simplistic to approach the trading relationship between a supermarket retailer and its suppliers as one where the retailer has complete and unilateral control over the gross margins it makes,” Yates said in his judgment.

“There was some suggestion of this approach in the ACCC’s case.”

The ACCC argued that Woolworths managers had asked a large number of “tier B” suppliers for payments of A$4,291 to A$1.4 million, with the aim of cutting a projected shortfall in half-year profit by Dec. 31, 2014.

Woolworths sought about A$60.2 million and received around A$18.1 million, the ACCC said.

But Woolworths said the regulator gave a “simplified and mistaken characterisation of the commerce in question”, according to the judgment.

The ACCC said in a statement following the judgment that it believed Woolworths’s actions “went well beyond hard commercial bargaining and (were) not consistent with business and community values”. It added that it would carefully consider the judgment.

In April, Wesfarmers Ltd, which owns Woolworths rival Coles, said the head of its department store Target quit amid an investigation into whether the chain inflated earnings by bringing forward supplier rebates.

Reporting by Byron Kaye; Editing by Stephen Coates

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