On 8 December 2016, the Federal Court (per Yates J) dismissed the unconscionable conduct proceedings brought under section 21 of the Australian Consumer Law (ACL) by the Australian Competition and Consumer Commission (ACCC) against Woolworths Ltd (Woolworths) in relation to the design and implementation of its “Mind the Gap” scheme, through which Woolworths sought to obtain payments from its suppliers (see Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 1472) (ACCC v Woolworths).

Key “take home” messages from the decision in ACCC v Woolworths are as follows.

  • Unequal bargaining power does not mean conduct is unconscionable. Mere use of superior bargaining power is not sufficient to give rise to a claim based on unconscionability .  However, in the circumstances of the case, the ACCC did not establish that Woolworths had superior bargaining power compared with its suppliers.
  • Gentility in commercial dealings is not required. It is important to consider “all the circumstances” in determining whether statutory unconscionability has been established – that is, the totality of the evidence in order to arrive at a “broad evaluative judgment”, rather than an analysis which is selective in its consideration of the relevant factors.  As the Court stated, characterisation of conduct as unconscionable is “not a process of personal intuitive assertions or idiosyncratic notions of commercial reality.”
  • Bringing a claim for unconscionability without leading evidence from one party to the arrangement is a significant impediment to establishing unconscionability.  Yates J observed that because the ACCC’s case did not involve calling evidence from any supplier affected by the “Mind the Gap” scheme, it was not possible to discern from the correspondence “whether a supplier was prepared to make a payment and, if so, why, and for what amount or, indeed, on what terms.”  He noted that “the absence of evidence from the suppliers concerned makes it impossible to assess a number of the factors to which the Court must have regard in considering ‘all the circumstances’”.
  • The case was materially different from the case against Coles. The nature of the claims alleged by the ACCC was the key difference between ACCC v Woolworths and Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (ACCC v Coles), and this contributed in large part to the difference in the outcome.  While Yates J noted that there were some “broad parallels” between ACCC v Woolworths and ACCC v Coles in that “each involved the making of “asks” and the seeking of “payments” in relation to goods supplied in an earlier period”, the cases diverged in structure and in fact from that point. He noted that whereas ACCC v Coles related to Coles’ “particular dealings with particular suppliers” which brought into play “particular facts and circumstances germane to each supplier”, ACCC v Woolworths was “more broadly based in that it is directed to the design and implementation of the Mind the Gap scheme as a whole”.
  • Potential implications in other legislative contexts – It is relevant to note that the consumer protection provisions in the ACL are mirrored in the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) – specifically, section 21 of the ACL in relation to goods and services has its equivalent in section 12CB of the ASIC Act in relation to financial services.  In the context of observing that the Court may not “pick and choose” from the list of matters to which the Court “may have regard”, and must take into account each matter that exists in respect of the impugned conduct, Yates J refers to the recent High Court decision in Paciocco v Australia & New Zealand Banking Group Ltd [2016] HCA 28 which considered this provision.  We consider it likely that future judicial consideration of unconscionable conduct under both the ASIC Act and the ACL will closely follow a similar approach in taking into account the matters listed.

For further information, please see our more detailed case summary and our consideration of its implications here.