ACCC alleges unconscionable conduct by Coles

The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court of Australia against Coles Supermarkets Australia Pty Ltd and Grocery Holdings Pty Ltd (together, Coles) alleging that Coles engaged in unconscionable conduct in contravention of the Australian Consumer Law (ACL).

“This is a matter of significant public interest involving allegations of unconscionable conduct by a large national company in its dealings with small business suppliers in the highly concentrated supermarket industry,” ACCC Chairman Rod Sims said.

“The ACCC alleges that Coles took advantage of its superior bargaining position by demanding money from suppliers that it was not lawfully entitled to, and was, in all the circumstances, unconscionable.”

“The ACCC has commenced these proceedings because it considers the alleged conduct was contrary to the prevailing business and social values which underpin business standards that apply to dealings with suppliers,” Mr Sims said.

“These proceedings will provide the Court with an opportunity to consider whether conduct of this nature, if proven, is unlawful in the context of large businesses dealing with their suppliers.”

These proceedings arise out of the same investigation as the proceedings that were instituted by the ACCC against Coles on 5 May 2014 in respect to Coles’ Active Retail Collaboration (ARC) program.

“The proceedings relating to ARC allege unconscionable conduct in the design and implementation of the ARC program specifically, whereas these new proceedings concern conduct which occurred in the course of Coles’ day to day interactions with suppliers,” Mr Sims said.

In the latest proceedings, the ACCC alleges that in 2011, Coles, outside of its trading terms with the suppliers concerned:

  • pursued agreements to pay Coles for “profit gaps” on a supplier’s goods, being the difference between the amount of profit Coles had wanted to make on those goods and the amount it had achieved;
  • pursued agreements to pay Coles, both retrospectively and prospectively, for amounts it claimed as “waste” on a supplier’s goods which occurred after Coles had accepted the goods, and price reductions, or “markdowns” implemented by Coles to clear goods;
  • imposed fines or penalties on suppliers for short or late deliveries.

It is alleged that the causes of both profit gaps and “waste and markdowns” were usually outside the control of suppliers, and that the amount of the fines Coles imposed was unrelated to the value of the goods, to any loss that Coles might actually have suffered from the short or late delivery, or to the reasons for the short or late delivery.

The ACCC alleges that Coles took advantage of its superior bargaining position and sought to achieve these outcomes by, among other things:

  • demanding agreements to pay money where it knew, or ought reasonably to have known that it had no legitimate basis for doing so;
  • failing to provide adequate information to suppliers to allow them to understand the basis upon which the demands were made;
  • applying undue pressure by, in some cases:
    • threatening measures that were commercially detrimental to the suppliers if they refused to agree to payments;
    • by pressing suppliers for urgent responses to agree to payments; or
    • by making multiple demands of suppliers for different types of payments;
  • withholding money due to suppliers and refusing to repay money when it knew it was not entitled to retain it.

The ACCC is seeking pecuniary penalties, declarations, injunctions and costs.

The matter is listed for a directions hearing in Melbourne at 10am on Friday 24 October 2014 before Justice Gordon.

Source: ACCC

Two men arrested for insider trading and abuse of public office, $7 million restrained

Two men have been arrested by the Australian Federal Police (AFP) today for offences relating to insider trading, money laundering, corruption and abuse of public office.

The arrests are the result of a joint AFP and ASIC operation after suspicious trading in foreign exchange derivatives was identified and monitored.

Authorities discovered evidence that a 26-year-old man, an employee of the National Australia Bank (NAB), was receiving sensitive information from a 24-year old man, an employee of the Australian Bureau of Statistics (ABS).

It will be alleged in court that the 26-year-old man was obtaining this market sensitive information before its official release by the ABS, then using it to enter into foreign exchange derivative products and personally profit from favourable movements in the prices of those derivatives.

This trading activity, occurring between August 2013 and May 2014, has resulted in profits of approximately $7 million. This has been restrained by the AFP-led Criminal Assets Confiscation Taskforce under Commonwealth proceeds of crime legislation.

Earlier today, the AFP and ASIC executed eight search warrants in Melbourne and Canberra, arresting the 26-year-old Clifton Hill man and the 24-year-old Belconnen man.

The 26-year-old Clifton Hill man has been charged with a range of offences relating to the use of inside information from ABS to unlawfully profit through the trading of foreign exchange derivatives and corrupting a public official.

The 24-year-old Belconnen man has been charged with offences relating to insider trading, receiving a corrupt benefit, release of sensitive information, and abuse of public office.

Items seized during the search warrants include $9,000 in cash.

Both the NAB and the ABS provided their full cooperation and assistance to police throughout the investigation.

AFP Acting National Manager Crime Operations Ian McCartney said today’s action sends a strong message to those engaging in this type of criminal activity.

‘The AFP and ASIC have worked together closely on this serious and complex investigation, utilising the resources and expertise of both agencies to bring about today’s arrests,’ Acting Assistant Commissioner McCartney said.

‘The assistance of the NAB and ABS in this matter was invaluable and has greatly contributed to the successful actions of the AFP and ASIC today.’

‘Investigations like this send a clear message to anyone who is thinking of engaging in this type of criminal activity – we have the ability to monitor you and take action, as we’ve done today.’

ASIC’s head of markets enforcement Chris Savundra said ASIC is dedicated to taking strong enforcement action against insider trading.

‘Insider trading is a serious criminal offence which will not be tolerated because it has the potential to destroy trust, discourage participation, and undermine confidence in the integrity of Australia’s financial markets,’ Mr Savundra said.

‘We reiterate that the outcome of today’s operation is a testament to the close working relationship and cooperation between the AFP and ASIC, and the dedication and expertise of the teams involved.’

Charge information:

The 26-year-old Clifton Hill man was charged with the following offences:

  • One count of conspiracy to engage in insider trading, pursuant to section 11.5 of the Criminal Code Act 1995, which is an offence by virtue of section 1311(1) of the Corporations Act 2001 (Corporations Act) in that they contravened section 1043A(1)(c) of theCorporations Act.
  • One count of giving a bribe to a Commonwealth public official, with the intention to influence the official in the exercise of his duties as a Commonwealth public official, contrary to section 141.1(1)(a)(iii) of the Criminal Code Act 1995 (Cth) (Criminal Code Act);
  • Three counts of insider trading, by trading in foreign exchange derivatives while in possession of inside information not generally available to the public, contrary to sections 1043A(1)(c) and 1311(1) of theCorporations Act;
  • One count of dealing in identification information using a carriage service and dealing with that identification information, with the intention to use the identification information to pretend to be or to pass themselves off as another person for the purpose of facilitating the commission of an offence, contrary to section 372.1A(1) of the Criminal Code Act.
  • One count of dealing in proceeds of crime, money or property worth AU$1,000,000 or more, contrary to section 400.3(1) of the Criminal Code Act.

He is scheduled to appear in Melbourne Magistrates Court.

The 24-year-old Belconnen man was charged with the following offences:

  • One count of conspiracy to engage in insider trading, pursuant to section 11.5 of the Criminal Code Act 1995, which is an offence by virtue of section 1311(1) of the Corporations Actin that they contravened section 1043A(1)(c) of the Corporations Act.
  • One count of receiving a bribe as a Commonwealth public official, contrary to section 141.1(3)(a)(iii) of the Criminal Code Act;
  • One count of abuse of public office to dishonestly obtain a benefit, contrary to section 142.2(1)(b)(i) of the Criminal Code Act;
  • One count of dealing in proceeds of crime, money or property worth $10,000 or more, contrary to section 400.6(1) of the Criminal Code Act.

He is scheduled to appear in Canberra Magistrates Court.

More information is available from ASIC.

ACCC acts on beer labelling

The Australian Competition and Consumer Commission has accepted a court enforceable undertaking from Carlton & United Breweries (CUB) in relation to ACCC concerns that it represented that Byron Bay Pale Lager was brewed by a small brewer in Byron Bay when this was not the case.

CUB has also paid two Infringement Notices to the value of $20,400 in relation to this conduct.

In 2013, CUB began supplying Byron Bay Pale Lager with labelling that incorporated the name Byron Bay Pale Lager, a pictorial representation of a lighthouse, text regarding Byron Bay and a map of the Byron Bay region showing the location of the Byron Bay Brewing Company. In fact, the beer was brewed by CUB at its brewery in Warnervale, some 630km away from Byron Bay.

The Byron Bay Brewing Company is a small brewery that, via its parent, licensed to CUB the right to supply Byron Bay Pale Lager Australia wide. The Byron Bay Brewing Company only brews Byron Bay Pale Lager for sale on tap at its site in Byron Bay.

“Many small brewers cater to consumers who prefer to support small, niche businesses. When large companies portray themselves as small businesses, it undermines the unique selling point that such small businesses depend upon, and it misleads consumers,” ACCC Chairman Rod Sims said.

“The ACCC will be writing to other participants putting them on notice of this matter in order to ensure that marketing and labelling in the beer market appropriately reflects where and by whom beer is brewed.”

In providing the enforceable undertaking, CUB acknowledged that the labelling may have misled consumers. CUB has agreed to cease distribution of product with the misleading labelling. More generally, CUB has undertaken that it will not make false or misleading representations concerning the scale of the brewery in which its products are brewed or the place of origin of its products.

CUB will place corrective notices on its website and in trade publications, and it will also provide a corrective notice for retailers to display at point-of-sale.

“This is an outcome that protects the interests of both beer buyers and small brewers.” Mr Sims said.

More information is available from the ACCC.

CBA under fire at ASIC inquiry

Michael West at The Sydney Morning Herald reports on the attention directed at CBA at a senate inquiry currently underway.

Commonwealth Bank’s top lawyer, David Cohen, was rebuked before a senate inquiry on Thursday morning for downplaying systematic fraud within the bank’s financial services arm as ”inappropriate”.
The word ”inappropriate” was suitable to describe an error of judgment in clothing choice, said Mark Bishop, chairman of the Senate inquiry into the performance of the Australian Securities and Investments Commission, but not the fraud and failure within the bank’s wealth management division which culminated in clients losing millions of dollars in savings.
It was a gruelling day for the bank’s three top lawyers who fronted the senate panel following the testimony of Commonwealth Financial Planning (CFP) victims.

CBA are not the only party receiving attention.  The article goes on to say, that having taken three and a half years to respond to allegations of misconduct…

Officers from the corporate regulator are scheduled to appear on Thursday afternoon to explain why their response was belated and inadequate.

The full story is available from The Sydney Morning Herald.

Sailors sacked over Facebook posts

David Wroe reports in The Sydney Morning Herald on action facing six Navy sailors with regards to their posts in social media.

Up to six Navy sailors have been sacked or ordered to justify their jobs over racist and anti-Muslim Facebook posts.

The article continues…

“Several sailors have had their employment terminated or have been issued with notices of cause for termination,” Vice Admiral Griggs said.
“Others have received a range of disciplinary punishments or other administrative sanctions.”
It is understood that at least three, and possibly as many as six, sailors have been sacked or ordered to show cause whey they should not be sacked.

The full story is available from The Sydney Morning Herald.

Milk wars: Coles admits to errors in ad campaign

Esther Han reports in The Sydney Morning Herald on how supermarket giant Coles is undertaking to correct claims made in a social media advertising campaign that it has admitted to the Australian Competition and Consumer Commission “would be likely to have” breached consumer law that prohibits misleading and deceptive conduct.

Coles spruiked a rosy picture of the dairy industry at the height of the $1 milk wars last year using data it could not substantiate, the consumer watchdog has found.

The supermarket giant has conceded it relied on figures that could not be proven when it claimed that shaving the price of a two-litre milk container from $2.41 to $2 early last year would increase farm-gate prices for producers and lift national dairy production.

Coles has agreed to correct the claims, admitting to the Australian Competition and Consumer Commission that its social media advertising blitz “would be likely to have” breached consumer law that prohibits misleading and deceptive conduct.

The full story is available from The Sydney Morning Herald.

Amendments to the Privacy Act take effect this week

Peter Clark has quite a few posts covering amendments to the Australian Privacy Act that come into effect this week.

This Wednesday the amendments to the Privacy Act 1988 take effect.  They should require a significant change to the manner in which privacy is regulated in Australia by the Privacy Commissioner.  He has been given significant and varied enforcement powers.  And the penalties for serious interferences with privacy, $340,000 for an individual and $1,700,000 for a company, and breaches of the Credit Reporting provisions of the Act (Part IIIA) are very significant.  The question is, and has always been, how active and effective the regulator will be.  Part of the problem in the past has been the opaque way complaints have been processed and the lack of understanding of the criteria used in not investigating complaints and and the relative lethargy of the office in the past, under previous occupants of the position. Given the gatekeeper role the Privacy Commissioner has under the Act this effects how effectively and assertively the Act is regulated, or otherwise.  It is a flaw in the structure of privacy legislation. Except for section 98 and the very limited circumstances of sections 90-91 any complaint has to be referred to the Privacy Commissioner (assuming no dispute resolution process is in place) and that office has the sole authority to bring civil penalty actions.  Unlike the Corporations Act where ASIC has powers as does an individual or company with standing to bring an action for breaches or the Consumer legislation where the ACCC and individuals can bring actions.
What actions has your organisation taken in relation to these amendments?  Have you updated your relevant policies and informed your staff?  Do you know they are aware of and understand how the changes affect them?

Twitter users can be held to account for their comments

An article by Michaela Whitbourn on The Sydney Morning Herald looks how recent cases have shown that amateur publishers can be held to account for their comments.

As the internet makes a media mogul of any person with a smartphone, tablet or computer, the defamation battles that were once waged only against well-resourced media companies are being fought on new ground.

Andrew Farley, a former student at Orange High School, found this out the hard way.

Farley did not have the benefit of editors, subeditors and lawyers vetting his posts when he made defamatory comments about music teacher Christine Mickle to about 50 Facebook friends and 60 Twitter followers.

Mickle sued him for defamation and, in an unpublished judgment in November that only came to light this week, he was ordered by the NSW District Court to pay $105,000 in damages. He has since declared bankruptcy.

Read more: Cases against Andrew Farley, Mike Kelly and Marieke Hardy show that Twitter users can be held to account for their comments

85% Of Electronics Retailers Ignore Australian Consumer Law: CHOICE

An article by Chris Jager over at lifehacker concerning a CHOICE investigation into the application of Australian Consumer Law illustrates how a lack of knowledge may be exposing major retailers and their staff to significant penalties:

The vast majority of staff at Australia’s major electronics retailers are pretty clueless when it comes to consumer rights, according to a new investigation by CHOICE. The consumer watchdog discovered widespread violations of Australian consumer law across 85 per cent of Harvey Norman, The Good Guys and JB Hi-Fi stores around the country.

During its investigation, CHOICE visited 80 Harvey Norman, The Good Guys and JB Hi-Fi stores across all Australian states and territories while posing as regular customers inquiring about the return of big ticket items. A whopping 85 per cent of sales staff were found to have limited or no understanding of their obligations under Australian consumer law.

In addition, every staff member that CHOICE spoke to attempted to sell an extended warranty, despite the fact that Australian retailers can’t impose an arbitrary period on when warranty support is available — instead, goods are expected to operate for a reasonable length of time.

For the full story see 85% Of Electronics Retailers Ignore Australian Consumer Law: CHOICE

It is interesting to note how the extended warranties are offered all of the time when there is an upside of increased sales commission, but how a lack of knowledge may actually be exposing these individuals and companies to a more significant downside in relation to penalties relating to breaches of Australian Consumer Law.  What are you doing to ensure you are not exposed to such penalties?

HP to pay $3 million for misleading consumers and retailers

The Federal Court today ordered Hewlett-Packard Australia (HP) to pay a $3 million civil pecuniary penalty for making false or misleading representations to customers and retailers regarding consumer guarantee rights.

The Australian Competition and Consumer Commission instituted proceedings against HP on 16 October 2012. Subsequently, the ACCC and HP came to an agreed settlement on the matter.

The Court found, based on the parties’ agreed facts, that HP made a number of false or misleading representations to consumers about their consumer guarantee rights, including that:

  • the remedies available to consumers were limited to the remedies available at HP’s discretion;
  • consumers were required to have their product repaired multiple times before they were entitled to a replacement;
  • the warranty period for HP products was limited to a specified express warranty period;
  • consumers were required to pay for remedies outside the express warranty period; and
  • products purchased online could only be returned to HP at HP’s sole discretion.

In addition, the Court found that HP represented to retailers that it was not liable to indemnify the retailer if the retailer failed to obtain authorisation from HP before giving a consumer a refund or replacement.

The full story is available from the Australian Competition & Consumer Commission.