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The owner of Coles has confirmed that an internal investigation is under way that will examine whether the nation’s second-biggest supermarket chain is engaging in improper predatory and anti-competitive behaviour in its dealings with suppliers.

Australian consumers for too long have worn higher and higher prices for food and groceries in this country.

Richard Goyder

Wesfarmers managing director Richard Goyder confirmed the internal investigation during a press conference for Wesfarmers half year results this afternoon, after the head of the competition watchdog launched a blistering attack on the supermarket chains last night.

‘‘We are doing our own investigations and obviously the ACCC is doing its and we will just let it all unfold,’’ Mr Goyder said.

While both major supermarket chains claim to have ongoing and constant reviews of their compliance practices, BusinessDay believes that Coles has escalated its internal investigation in the wake of the Australian Consumer and Competition Commission’s recent focus on the supermarkets.

Breach of competition law?

During last night’s briefing to the estimates committee in Canberra, ACCC chairman Rod Sims said the regulator had obtained ‘‘considerable material from the major supermarket chains’’.

Mr Sims confirmed the ACCC was close to finalising an investigation into the petrol discounts offered by the large supermarkets.

He also confirmed that 50 businesses that supply the supermarket giants had spoken to the ACCC in the past year and it was still investigating their claims.

‘‘Now that we understand the broad nature and context of the alleged conduct, it is evident that, if fully put to proof, this conduct may constitute a breach of the [Competition and Consumer] Act and so it is now being investigated in even more detail,’’ he said.

Mr Sims said the alleged conduct by both Woolworths and Coles included:

• Persistent demands for additional payments from suppliers, above and beyond that negotiated in their terms of trade;
• The imposition on suppliers of penalties that did not form part of any negotiated terms of trade, and which apparently do not relate to actual costs incurred by the major supermarket chains as a result of the conduct which has led to the penalty being imposed;
• Threats to remove products from supermarket shelves or otherwise disadvantage suppliers if claims for extra payments or penalties are not paid;
• Failure to pay prices agreed with suppliers; and  conduct discriminating in favour of homebrand products.

The ACCC was now using compulsory information powers to investigate Coles and Woolworths’ treatment of other suppliers, but has not yet decided whether it will take legal action, Mr Sims said.

A Woolworths spokeswoman was unavailable for comment.

Working with the regulator

Mr Goyder said Coles was constantly supplying material to regulatory authorities and that the company had internal processes to make sure the Coles operation acted in a responsible and ethical way with its suppliers.

He said the conglomerate was focused on making sure it conducted its relationship with suppliers in a proper way, and was investigating Coles to ensure this was the case.

‘‘That [the investigation] has been something that we have had to ensure we have got right,” he said. ‘‘We seem to always be asked by regulatory authorities to provide information on various things.’’

Mr Goyder said the ACCC also had more than enough power at the moment to deal with how Coles behaves, as well as the behaviour of its suppliers, seemingly downplaying suggestions the regulator should be given more authority to investigate the sector.

Gaining ‘price trust’

Hitting back at suggestions Coles was squeezing its suppliers, Mr Goyder said since Wesfarmers acquired the business in 2007 and a new management was put into the business in 2008 that it needed to gain ‘‘price trust’’ from consumers.

‘‘Australian consumers for too long have worn higher and higher prices for food and groceries in this country above the rate of inflation.’’

Wesfarmers is the owner of Coles, Bunnings, Target, Kmart and Officeworks.

Meanwhile, Mr Sims said he expects the ACCC will finish an investigation into petrol discount vouchers offered to customers who purchase a minimum amount from a supermarket.

He said the ACCC was looking as whether Coles and Woolworths offers ‘‘may have the effect of distorting competition between fuel retailers in circumstances where, having regard to retail fuel margins, the discounts may be difficult or even impossible for other fuel retailers to match’’.