Supply contracts are negotiated technical instruments which establish and govern the relationship between buyer and supplier parties. They ensure the appropriate allocation of risk, rights and obligations between the parties. The positions of each party to the contract must be clearly defined and the balance of power between them has a big impact on the relationship

Industry Supply Contract Case Study

Coles/Woolworths Abuse of Market Power

Supply contracts are negotiated technical instruments which establish and govern the relationship between buyer and supplier parties. They ensure the appropriate allocation of risk, rights and obligations between the parties. The positions of each party to the contract must be clearly defined and the balance of power between them has a big impact on the relationship.

In 2011 allegations of abuse of market power by Coles and Woolworths came to light, suggesting that the two giant supermarkets have been intimidating their suppliers in various ways. The practice has, in some quarters, been described as supplier bullying. In 2014 the ACCC found that Coles had engaged in “unconscionable conduct” vs suppliers and ordered them to pay $10 million dollars in penalty.

Based on an extensive research on the matter, utilising media reports and a literature review on abuse of market power and questions of unconscionable conduct and undue influence in the negotiation and establishment of contracts, construct a comprehensive case study of the situation.

Some of the areas to consider in your investigation include (but not limited to):

  • Discussion of the nature of contracts in question (supply contracts)
  • Description of the context of contract (i.e. the duopoly situation in Australia)
  • Assessment of the power balance between the parties
  • Assessment of the reasons for the breakdown
  • Assessment of the contractual flaws that might have led to the situation
  • Consideration of the questions of abuse of market power, undue influence, duress and unconscionability (literature review)
  • Suggestions on how such a situation might have been avoided

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