Updated

The Australian Competition and Consumer Commission (ACCC) has taken further action against Coles, accusing it of engaging in unconscionable conduct and breaching Australian Consumer Law.

The ACCC says it has internal Coles emails detailing how it set aside at least one day each year, referred to within Coles as “profit day” or “perfect profit day”, that set divisional targets for money to be secured from suppliers.

When Coles made less of a profit on items because they were unsold or discounted, it simply pressured suppliers to make up the difference, or “profit gap”, says the ACCC.

The ACCC alleges that in 2011, Coles, outside of its trading terms, pursued suppliers for payments to make up profit gaps, waste and markdowns that were outside the control of suppliers and were retrospective treatments of contracts.

It also imposed fines or penalties on suppliers for short or late deliveries.

The consumer watchdog alleges that Coles took advantage of its superior bargaining position, demanding agreements to pay money where it knew, or ought reasonably to have known, that it had no legitimate basis for doing so. The ACCC is seeking pecuniary penalties, declarations, injunctions, and costs.

“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.

Coles has rejected the ACCC’s claims of unconscionable conduct.

While it acknowledged the existence of a “Profit Day”, Coles said it involved discussions with suppliers in relation to outstanding claims and additional business opportunities.

The discussions were partly aimed at ensuring suppliers delivered stock on time, as well as ending high levels of waste or the poor performance of products, which would contribute to higher prices for customers.

Coles said the ACCC’s allegations concerned only five of its more than 4000 suppliers, and all five continued to be valued suppliers to Coles.

The communications and negotiations with those suppliers were about the failure to deliver products in the lead up to Christmas 2011, as well as waste and damage to products and the profitability of products, Coles said in a statement.

“Commercial negotiations can be robust, regardless of the industry or sector,” it said.

The latest court action follows legal proceedings in May in which the ACCC accused Coles of extracting $16 million a year from small suppliers.

It is due to in the Federal Court in Melbourne on October 24.