Woolworths’ “Mind the Gap” scheme not unconscionable

8 December 2016

The Federal Court today dismissed proceedings brought by the Australian Competition and Consumer Commission against Woolworths Ltd (Woolworths). The ACCC had alleged that Woolworths had engaged in unconscionable conduct in its dealing with a large number of its suppliers through its “Mind the Gap” scheme.

In December 2014, Woolworths developed the “Mind the Gap” scheme to reduce a significant half-year gross profit shortfall, with category managers and buyers contacting many suppliers to ask for urgent payments ranging from $4,291 to $1.4 million.

The Federal Court ruled that Woolworths’ requests for these payments were not unconscionable within the meaning of the Australian Consumer Law. 

Justice Yates noted the complex trading relationship between Woolworths and its suppliers and that it is always under negotiation and, depending on circumstances, constantly changing.

“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. If you’re a supplier subject to arbitrary demands, it’s very hard to make future investment decisions in the face of financial uncertainty,” ACCC Chairman Rod Sims said.

“The ACCC will carefully consider the judgment. Pursuing unconscionable conduct remains an important area for the ACCC and we will continue to take enforcement action where appropriate, particularly in relation to supply chain issues,” Mr Sims said.

Background

On 10 December 2015, the ACCC instituted proceedings in the Federal Court against Woolworths Limited, alleging it engaged in unconscionable conduct in dealings with a large number of its supermarket suppliers, in contravention of the Australian Consumer Law

Release number: 
MR 234/16
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