Crackdown on unconscionable dealings

The Australian Competition and Consumer Commission (ACCC) has now begun to exercise its powers under the Australian Competition and Consumer Act 2010 (the Act), recently accusing Coles of engaging in unconscionable conduct. Coles must now defend itself against claims that, in violation of the Australian Consumer Law (ACL), it used unfair tactics and pressured suppliers into giving Coles a rebate under an incentive scheme.

Under the ACL, there is an ‘unconscionable conduct’ provision preventing the use of unfair tactics such as those Coles allegedly employed.

The ACCC has accused Coles of several instances of unconscionable conduct under the Act. This includes using its superior bargaining power to ‘bully’ 200 suppliers into providing rebates and providing misleading information to suppliers about supposed savings and benefits from the scheme. The cash benefit to Coles from the scheme is estimated at $16 million.

Defining ‘unconscionable conduct’ is the major issue courts face. Although there is no precise definition under the Act, the ACL gives some guidance as to what factors courts may consider when determining if conduct is “unconscionable”, including:

• significant difference in bargaining position
• undue influence or use of unfair tactics
• willingness of the stronger party to enter into negotiations

Coles has now filed a defence against the allegations, denying that they used their superior bargaining position to pressure suppliers and maintaining that the scheme was ultimately to the suppliers’ benefit.

What this means to Australian businesses in practice will only become clear once the provisions have been considered further by the court. We are hopeful that the case against Coles will clarify the position.