Consideration
190 It is convenient to consider, firstly, the thirteen propositions set out above, in the order in which the ACCC advanced them.
191 As to the first element ([175] above), the evidence establishes that the Mind the Gap scheme was a structured profit program which analysed the performance of suppliers across the breadth of the Woolworths Supermarkets business, constituted by the Tier B suppliers, in accordance with the metrics shown in the Opportunity Reports (which had been compiled for that purpose) and the agreed targets in Joint Business Plans (where those plans existed and were relevant to the suppliers concerned).
192 There is no reason to doubt that the data used in the reports were sourced from Woolworths' business records, most likely its accounting records. Thus, the Opportunity Reports were fact-based in the sense that they were based on actual financial data reflecting the actual course of trade between Woolworths and each of the suppliers identified in the reports.
193 The evidence establishes that reports, similar to the Opportunity Reports, were available to Woolworths' category managers and buyers in the Woolworths Supermarket business, and were used by category managers and buyers in reviewing the performance of suppliers and conducting negotiations with those suppliers, including in relation to obtaining financial support from them based on their financial performance in a previous period. I am satisfied that these negotiations included negotiations that were carried out with a view to improving Woolworths' profitability relative to that earlier period.
194 I am satisfied that the metrics used in the Opportunity Reports were not unusual. I am satisfied that these metrics, or ones very similar to them, were used by Woolworths prior to the implementation of the Mind the Gap scheme for reviewing supplier performance and in seeking financial support. The metrics were of a kind used by other supermarket businesses.
195 I am satisfied that when, prior to implementation of the Mind the Gap scheme, Woolworths sought and obtained financial support from its suppliers, that support could take a variety of forms. I am satisfied that when "payments" were made they were generally effected by adjusting the account between Woolworths and its supplier. No different course was envisaged or adopted when the Mind the Gap scheme was implemented.
196 I am satisfied that the Mind the Gap scheme was formalised across the Woolworths Supermarkets business and was implemented by a co-ordinated approach to suppliers, principally in the week commencing 8 December 2014. It was undertaken with a view to asking for, negotiating and obtaining, financial support from those suppliers who, according to Woolworths, had underperformed in the period July to October 2014 relative to the same period for the previous year. It was undertaken with a view to enhancing the profit performance of the Woolworths Supermarket business for the half year ending 31 December 2014. This co-ordinated approach was, however, one of a number of initiatives undertaken by Woolworths at that time to improve its profit performance. I am satisfied that the "asks" made of suppliers, as part of that co-ordinated approach, were typical of the approaches for financial support and negotiations that took place between Woolworths and various suppliers at other times and on other occasions, albeit that the approaches and negotiations at those times and on those occasions were not part of a co-ordinated approach across the whole of the Woolworths Supermarkets business. I would add that, on the evidence, there was nothing unusual in seeking financial support with a view to improving Woolworths' profitability in respect of an earlier trading period (as opposed to seeking financial support with a view to increasing profitability in a future period).
197 These conclusions are based on the evidence I have accepted and summarised at [33]-[81] and [82]-[123] above.
198 Thus, while I accept that the Mind the Gap scheme was unusual in that it was a formalised and co-ordinated campaign across the whole of the Woolworths Supermarket business, Woolworths' dealings with its suppliers in implementing that scheme - including by making "asks" based on previous financial performance with a view to profit recovery for that period - were not unusual and were typical of its dealings with suppliers. I therefore reject the ACCC's submission to the extent that it contends that the approaches made to, and "asks" made of, suppliers were anything but "business as usual" and did not reflect an aspect of Woolworths' normal commercial dealings with its suppliers.
199 In this connection, I accept Woolworths' submission that, from the perspective of any individual supplier who was contacted as part of the Mind the Gap scheme, the experience would have been no different to any ordinary negotiation that the supplier might have had with Woolworths. Further, as Woolworths submitted, there is no evidence that any individual supplier would have been aware of, or would have been affected by, the fact that Woolworths was having similar negotiations with other suppliers at the same time.
200 It is important to understand that the ACCC did not suggest that individual approaches to suppliers to make "asks", such as those exemplified at [42]-[56] above, which were outside the Mind the Gap scheme, constituted conduct that was unconscionable. In other words, the ACCC did not argue that similar conduct of Woolworths, in relation to individual suppliers, before the implementation of the Mind the Gap scheme, was "unlawfully skewed": see, in this connection, the related observations of Keane J in Paciocco at [290]. The gravamen of Woolworths' case is that the making of "asks" under, and in the circumstances of, the Mind the Gap scheme was not qualitatively different to the making of "asks" made in the normal course of the Woolworths Supermarkets business. The ACCC advanced the contrary proposition. I accept Woolworths' submission. Further, I accept that the size and administration of the Mind the Gap scheme could not have affected whether the scheme was unconscionable in respect of an individual supplier, although the ACCC's case was not directed to the position of individual suppliers.
201 As to the second element ([176] above), I do not think that the ACCC's use of the pejorative expression "grab for cash" assists in the analysis of the conduct at hand. Neither the ACL nor the Act proscribes the pursuit of profit as such. Thus, the mere fact that conduct is engaged in for profit cannot be a hallmark of unconscionability, particularly in the context of trade or commerce. The plain fact is that the commercial relationships between Woolworths and its suppliers were such that each party can be taken as seeking to maximise its profit out of the relationship. Further, it can make no difference to the assessment of the conduct at hand that it took place in early December 2014 with a view to improving Woolworths' profitability considered as at 31 December.
202 As to the third element ([177] above), I do not think that recourse to notions of "fault" or, indeed, "innocence", assists in the analysis: see further at [235] below. I do not think that, on the evidence, it can be seriously contested that, for the Woolworths Supermarkets business, and like supermarket businesses, cost to the retailer is not just a function of the price-per-unit paid for the goods. It includes all other financial support provided by the supplier in respect of the goods.
203 In closing submissions, Woolworths provided an analysis that was taken from the Opportunity Reports. The analysis looked at one "lens" - Drop in Overall Spend Level. This showed that the Tier B suppliers, collectively, had reduced their spend to promote products through Woolworths by a combined $46 million when compared to the same period in the previous year - an amount, I observe, far in excess of the amount sought to be recovered under the Mind the Gap scheme. This reflects, for Woolworths, a relative, overall increase in the cost of goods sold, based on that measure. I accept, of course, the limitations of such a comparison. Moreover, I recognise that the determination of the cost of goods sold, in respect of individual goods, may well be affected by a variety of matters which Woolworths and the supplier concerned would be well-aware of and, I would add, well-able to negotiate. Nevertheless, the analysis gives some indication of the dynamic nature of the trading relationships involved and how, ultimately, changes in matters such as trade spend might well affect profitability from Woolworths' perspective. The suggestion implicit in the ACCC's submission that suppliers had not contributed to Woolworths' profit shortfall for the relevant period, has not been established as a fact by the ACCC.
204 Finally, the proposition that suppliers were neither offered nor received any benefit from making a Mind the Gap payment requires comment. First, as a universal statement, the proposition is not correct. For example, Ms Sandercock gave evidence that, in a number of cases, she did give suppliers benefits. However, those benefits could not be given before the (calendar) year end. There is also other evidence in the email correspondence which shows that, in some cases, future benefits were offered or negotiated in the context of seeking Mind the Gap payments. Secondly, from Woolworths' perspective as a retailer, its analyses suggested that, in the period under review, certain suppliers had already benefitted by sales growth or reduced trade spend (what Ms Sandercock described as "a profit upside for them and a profit downside for us").
205 It is certainly true to say that the focus of the Mind the Gap scheme was to improve Woolworths' profitability by seeking to adjust what it considered to be an imbalance between supplier and retailer of the benefits obtained from the trading relationship in the period July to October 2014. This is what Mr Tan described in his evidence in chief as getting the gross margin "back into shape". Ms Sandercock used a similar expression in some of her correspondence with suppliers. This was the "opportunity" identified in the Opportunity Reports based on the data that Woolworths had generated. However, it does not seem to me that the attempt to realise this "opportunity" by making "asks" of suppliers based on the data provided, itself amounts to conduct that is unconscionable.
206 The fourth element - that the Mind the Gap scheme was retrospective ([178] above) - was not directly pleaded by the ACCC as an element of unconscionability, although it might be accommodated by the eighth allegation noted at [124] above. Nevertheless, my findings in relation to the third element substantially answer this allegation. The issue raised by the ACCC was not that the Opportunity Reports analysed supplier performance for a period that had passed. Indeed, it is difficult to see how an analysis of supplier performance could be anything but "retrospective" in that sense. The ACCC's point was that the "asks" made and "payments" negotiated under the Mind the Gap scheme were not to secure benefits for suppliers that might promote or increase the future sale of the suppliers' products through Woolworths. Rather, they related to transactions between supplier and retailer that had already taken place and Woolworths had no contractual entitlement to revisit those transactions to seek additional benefits. As I have already found, the proposition that future benefits were not secured by suppliers is not universally correct. But, in any event, approaching a supplier to re-open, as it were, a concluded transaction to seek a greater benefit than that already gained from it does not, without more, amount to conduct that is unconscionable.
207 As to the fifth element ([179] above), I do not think that a failure to "foreshadow" that an "ask" would be made or, even more, to seek prior supplier agreement to make such an "ask", are matters of any significance once it is accepted, as I do accept, that the approaches made to suppliers under the Mind the Gap scheme were not unusual and were typical of Woolworths' dealings with various suppliers. In any event, the ACCC's submission is tantamount to saying that there is an element of unconscionability when a party to a trading relationship approaches the other party to make a request or to engage in a negotiation without the first party obtaining the second party's prior agreement to that approach being made. That proposition is, with respect, untenable.
208 The sixth element ([180] above) is also without significance. Woolworths did not need a contractual or other legal right to approach its suppliers to enter into a negotiation with them; nor did it assert any such right. More importantly, the evidence does not show that, in seeking Mind the Gap payments, Woolworths asserted a contractual or other legal right to any such "payment". The evidence shows that the Tier B suppliers were cognisant of that fact. Many of them raised it as a reason for declining to entertain the "ask" that had been made.
209 The seventh element - that the quantum of the "asks" was entirely arbitrary ([181] above) - was not pleaded by the ACCC. A particular difficulty of not pleading this allegation is illustrated by the ACCC's submission that the Opportunity Reports were simply a set of numbers which were divided up in a manner which was intended to produce the $15 million gap that Woolworths had identified. This submission was echoed in the ACCC's written closing submissions that the Opportunity Reports were a "data artifice" to justify the making of the "asks". If that allegation had been properly raised - as it should have been if reliance were to be placed on it - then it was certainly capable of being addressed in evidence. However, that opportunity has been effectively denied to Woolworths. In the circumstances, I am not prepared to permit the ACCC to rely on the allegation now. It would be unfair to permit it to do so.
210 There are, in any event, a number of significant difficulties confronting acceptance of the allegation. Had it been necessary for me to do so, I would have found against this allegation on the evidence before me. As I have found, the Opportunity Reports were fact-based (in the sense I have discussed) and involved the use of metrics, or ones very similar to them, that were used by Woolworths on other occasions, prior to the implementation of the Mind the Gap scheme, for reviewing supplier performance and in seeking financial support. As I have also found, those metrics were of a kind used by other, like supermarket businesses. The fact that Woolworths' target under the Mind the Gap scheme was set as a percentage of the total "opportunities" revealed by the Opportunity Reports can be taken as signifying no more than that Woolworths appreciated that the "opportunities" it had identified would only be realised through a course of negotiation and that some negotiations would lead to agreement and others would not. In the absence of proper evidence from the ACCC, I do not attribute any particular significance to the fact that Woolworths' target was set at approximately 10% of the total value of the "opportunities" revealed in the Opportunity Reports. The ACCC's submission that no other, rational commercial basis was given for the target is based on the erroneous premise that Woolworths, not the ACCC, bore the onus of proof on the question of unconscionability. The ACCC led no evidence on that particular matter and, as I have said, Woolworths was effectively denied the opportunity to do so by the ACCC's failure to properly raise the issue.
211 As to the eighth element ([182] above), I do not accept that the "asks" made by Woolworths were "demands" or that they are properly characterised as "urgent" or "insistent". Certainly, the evidence shows that, generally speaking, suppliers were asked to come forward with proposals within a relatively short timeframe, but I do not accept that this transformed the "asks" into "demands" or that the "asks" were made in circumstances that necessarily imported urgency. The setting of timeframes for action, like other targets, is not unusual commercial behaviour. In any event, the timeframes set in the "asks" could not be enforced by Woolworths. I have no doubt that this would have been apparent to, and appreciated by, the suppliers who were approached. I have already given examples of deadlines and timeframes being set in Woolworths' approaches to suppliers outside the Mind the Gap scheme.
212 The evidence shows that, generally speaking, category managers and buyers were forthright in making their "asks". However, this did not make Woolworths' conduct "insistent" in some untoward way. Gentility was not required, although I note that, generally speaking, the tone of the email communications in evidence was civil and polite and, in many cases, cordial on both sides. Some communications between Woolworths and the supplier were, on each side, robust but no more robust than would be expected of commercial parties putting their respective positions plainly.
213 As regards the "threat" of "an absence of cooperation in the future", the scripts provided to category managers and buyers (see [102] above) contain statements that Woolworths' "ability to continue to support your business is predicated on [gross profit margin or trade spend] moving in the right direction". The scripts also contain statements that it would not be sustainable for Woolworths to "grow suppliers whose [gross profit margin or trade spend] is going backwards". These statements, or some modified form of them, were made in a number of emails to suppliers. However, when read in context, I do not think that, properly analysed, these statements could reasonably be taken as "threats". They are but examples of plain-speaking where, in the context of a trading relationship, one party, acting in its own interests, seeks to make clear its commercial expectations. Certainly, the ACCC called no evidence from any supplier who considered that it had been "threatened" by such statements.
214 There is some email correspondence on which the ACCC placed particular reliance in this regard. Mr Tan was cross-examined on one email chain in an attempt to extract a concession from him that the dealings between Woolworths and the supplier concerned contained a threat. One significant difficulty with this approach to the evidence is that Mr Tan was not a party to the correspondence and was not otherwise involved in that particular dealing with the supplier concerned. Another significant difficulty is that the background to the email correspondence is not at all clear.
215 In this connection, the correspondence was between one of Woolworths' category managers and a supplier, in respect of (what seems to be) another supplier's product. The relationship between the two suppliers is not clear and, I believe, was not explained at the hearing. It is possible that the party with whom Woolworths was corresponding was a wholesaler or a broker of the second supplier's product. What is clear is that Woolworths was seeking $23,000 trade support for the second supplier's product. This "ask" was said to be "based on your [ie, the first supplier's] performance in 2014". It was also linked to "an opportunity in January to participate in the Summer Savers Campaign at $23k". Thus, the "ask" was linked to a future marketing campaign - once again contradicting the ACCC's contention that the "asks" were entirely retrospective in the sense in which the ACCC used that term. The subsequent emails in the chain are from the first supplier in which that supplier purported to summarise the content of intervening conversations between Woolworths' category manager and that supplier. There is no evidence of the conversations beyond these purported summaries.
216 The summary of one conversation refers to the fact that Woolworths was seeking to invoice the $23,000 investment before the end of December 2014. The summary also records reference to the first supplier's understanding that if the second supplier could not offer the $23,000 investment then Woolworths would "potentially delete the product". A subsequent email in the chain, once again written by the first supplier, purports to summarise a conversation between Woolworths' category manager and that supplier in which it was said that if the second supplier could not "fix" the $23,000 gap, distribution and support from Woolworths would decline in 2015. This email also makes clear that the second supplier had apparently advised, in response to Woolworths' "ask", that it would not support additional funding to Woolworths unless a price increase (to be borne by Woolworths) had been "approved and actioned for orders". The evidence does not deal with the outcome of the negotiation. I should record, however, that the emails were written in obviously cordial terms.
217 It is entirely understandable that Mr Tan could not sensibly comment on the emails in the chain or, indeed, the conversations they purported to summarise. Woolworths submitted that there was no reliable evidence as to whether the conversations took place as recorded. The difficulty with that submission is that Woolworths did not object to the tender of the emails or seek to limit the use to which they could be put in evidence. Therefore, despite their hearsay character, the emails stand as some evidence of the substance of the conversations. Nonetheless, all the circumstances surrounding the making of the "ask" are not in evidence. For all I know, the product in question could well have been, on any objective assessment, an underperforming product for which trade support from one or other supplier was necessary in order for it to be commercially viable in Woolworths' eyes. The statement (assuming it to have been made) that the product could, potentially, be deleted, may well have been completely justified from a commercial perspective. Similarly, the statement (assuming it to have been made) that, without the requested supplier funding, Woolworths' distribution and support for the product would decline in the forthcoming year, may also have been completely justified.
218 Another email chain on which the ACCC placed reliance also purports to summarise conversations between one of Woolworths' category managers and the supplier. In the email, the supplier referred to Woolworths' request as "unusual". The supplier recorded its understanding that, if it did not support the claim, Woolworths would not be in a position to support a particular range of the supplier's products the following year. The supplier asked Woolworths to confirm its understanding of Woolworths' claim. In a subsequent email, following other emails and, it would seem, telephone conversations, the supplier wrote:
We are quite concerned at this situation especially in regard to the advice that if we do not support Woolworths with this claim then Woolworths will not be in a position to support [the product range] next year.
219 The supplier went on to suggest a number of initiatives that Woolworths might consider for the range of products, and concluded by stating:
In summary, we do not accept or support the claim based on the information and criteria provided. However as always we are willing to discuss opportunities for mutually beneficial commercial outcomes.
If you have any other thoughts or ideas of what we can do together please feel free to give me a call or send me a note.
Thanks and regards,
220 In a responding email, Woolworths' category manager refuted the fact that she had said that Woolworths would not support the product range if the supplier did not support Woolworths' claim. She said:
… that was your wording in the first email - not mine …
221 In light of that response, there is a question whether the earlier conversation (insofar as it seeks to deal with the question of lack of future support by Woolworths) has been fully and accurately recorded in the supplier's email. This example illustrates the danger of acting on email correspondence alone without knowing all the surrounding circumstances.
222 The chain of emails in this particular example continued, but the negotiation on this topic appears to have ended in an email dated 12 December 2014, when the supplier, through its general manager, stated:
As we do not and cannot control your selling prices, promo programme/ pricing etc we dont agree that we should contribute to the Woolworths Profit Shortfall.
…
I will brief our team and ensure we are looking at opportunities to drive both companies sales and profits on a more regular basis and I will personally review the next Half Promotional Programme as soon as it is received to see what we can action promptly.
223 This response, and others like it in the evidence, tends against the proposition that suppliers were "threatened" (as the ACCC would have it) in the course of Woolworths implementing the Mind the Gap scheme. Once again, the ACCC called no evidence from any supplier who considered that it had been "threatened" by Woolworths' category managers and buyers when making their "asks".
224 Another aspect of the ACCC's case on "threats" is the threat of "escalation". In this context, "escalation" means no more than that one person on one side of a negotiation passes the negotiation up the line to his or her superior for further handling. In cross-examination, Mr Dower described "escalation" thus:
What did "escalations" refer to?---Escalation is a common process on both sides, whether you're buying or selling. It's, effectively, if the negotiation is not seeming to get to a resolution - a mutual resolution, then often it's elevated to the line manager of that individual on both sides, and it's a very effective mechanism because, having experienced it many times, it actually relieves the pressure and actually is quite amicable as you move up the escalation and most things get resolved. I will give you an example: throughout the entire Mind the Gap program no escalation ever reached myself. Everything was resolved by mutual agreement through escalation through buyers and sellers. Entirely normal practice.
225 I accept this evidence. The email correspondence I have discussed at [218]-[222] above is an example of "escalation" practised by the supplier, when, on the face of the correspondence, negotiations with Woolworths passed from the supplier's National Business Manager to its General Manager, who made the response quoted at [222] above. I have referred to other examples of "escalation" on Woolworths' part (but not during the implementation of the Mind the Gap scheme) at [54] above. The fact that the negotiations between Woolworths and its suppliers, in the course of the Mind the Gap scheme, involved or might have involved "escalation", either on Woolworths' part or on the supplier's part, does not, without more, signify unconscionability.
226 The ninth element ([183] above) is related to the seventh element. Further, like the seventh element, it was not pleaded by the ACCC. The ninth element focuses on the window of time in respect of which Woolworths carried out its assessment of supplier performance. It also focuses on the "lenses" adopted by Woolworths, which the ACCC branded as "bizarre". Once again, if the criticisms raised by the ACCC's closing submissions had been properly raised in its pleading, they could have been addressed by Woolworths in evidence. Woolworths submitted that it would have adduced evidence from its PTI team and from industry experts. I accept that to be the case. I will not let the ACCC raise these allegations now.
227 In any event, like the allegations raised with respect to the seventh element, there are a number of significant difficulties confronting an acceptance of them. Indeed, had it been necessary for me to do so, I would not have been prepared to find, on the evidence before me, that the period July to October was a small window of time to carry out the assessment, or that it was an otherwise inapt period of time for that purpose. Similarly, I would not have been prepared to find, on the evidence before me, that the "lenses" adopted by Woolworths were inappropriate, let alone "bizarre". The latter characterisation is simply the ACCC's say-so.
228 The tenth element ([184] above) was also not pleaded by the ACCC. It, too, could have been specifically addressed by Woolworths in evidence had it been properly raised. Once again, I will not let the ACCC raise these allegations now. In any event, had it been necessary for me to do so, I would not have been prepared to find, on the evidence before me, that no one in Woolworths questioned, checked or verified the Opportunity Reports for "rationality". First, as I have already found, there is no reason to question the accuracy of the data in the reports. I am satisfied that the data are based on Woolworths' business and accounting records. Secondly, I have already addressed the question of the "lenses" used and will not repeat what I have said. Thirdly, the evidence shows, and I accept, that Woolworths' category managers and buyers were instructed to use their discretion and knowledge of the suppliers concerned in making "asks". This discretion covered whether an "ask" should be made and, if so, for how much. Ms Sandercock's evidence illustrates how this process was carried out at a practical level. It is true that many "asks" were made for amounts shown in the Opportunity Reports. However, this does not mean that these amounts were not questioned, checked or verified by Woolworths' category managers and buyers.
229 The evidence shows that, in some cases, the category managers and buyers used more than one "lens" shown in the Opportunity Reports to illustrate what Woolworths regarded to be the particular supplier's underperformance. However, I do not think that anything turns on that fact. Typically, the supplier was asked to come forward with a plan to address its overall underperformance in light of the presented data. There are, however, two "asks" to which further comment is required. In each case, the buyer concerned made an "ask" by adding together the supplier's underperformance measured by two "lenses", rather than simply using the amount shown in the Consolidated View (ie, the highest amount quantified amongst all "lenses").
230 By way of illustration, in the first case the buyer made an "ask" for "$89.03K" based on two "lenses" - "$33.1K" Drop in Overall Spend Level and "$55.8K" Drop in Coop & Other Claims. The Consolidated View in the Opportunity Report showed a value of $55,863. In this case, the guidance provided by the Opportunity Report indicated a likely maximum "ask" of $55,863. The supplier responded to the "ask" by bringing certain matters to Woolworths' attention in relation to its current trade performance and its anticipated trade performance. The supplier's email, which declined to make a "payment", concluded by stating:
All of the above points shall see a major increase in our support monies to Woolworths and covering off your current short fall.
231 Woolworths' buyer responded:
Thank you [name of recipient].
Have a good weekend.
Regards
232 This response appears to be the end of the negotiation.
233 In the second case (involving a different buyer), the only email in evidence is the supplier's response to the "ask". Nevertheless, it is possible that the buyer, once again, added the amounts for two "lenses" rather than relying on the guidance provided by the amount shown in the Consolidated View in the Opportunity Report. The supplier's responding email expressed the view that the magnitude of the "ask" (in this case $287,000) was unjustified. The supplier also provided information on its promotional activities and funding in relation to the product range in question. The email concluded:
… [The supplier] is very keen to work with Woolworths to grow our sales and your profitability. We suggest developing a mutually beneficial joint business development plan that would result in increased support in return for ranging, distribution, position on shelf or other initiatives that would be mutually beneficial. We would welcome the opportunity to meet to commence work on a plan at any time.
234 It is possible that, in these two cases, each buyer either misunderstood the Opportunity Report or made a mistake by adding the amounts of two "lenses" together. It is also possible that each buyer saw an opportunity to make a greater "ask" than the Consolidated View in the Opportunity Report indicated. I am unable to tell from the evidence. The latter possibility is feasible because other "asks" made by one of these buyers suggest that she correctly understood the significance of the Consolidated View column. These were the only cases specifically drawn to my attention in which two amounts might have been added together to come up with the specific amount of the "ask". I do not think that, in the absence of further evidence or explanation, any particular conclusion can be drawn from what appear to be, in any event, isolated incidents of this occurring.
235 The eleventh and twelfth elements ([185]-[186] above) can be dealt with together. As I have said with respect to the third element, I do not think that notions of "fault" or "innocence" assist in the analysis. Woolworths analysed the trade performance of the Tier B suppliers and, where it considered it appropriate to do so, approached particular suppliers to make good what it regarded to be the shortfall in their performance. The ACCC's submissions proceed as if Woolworths' perceived profit shortfall was attributable to actions which it, alone, took or failed to take. As I have found at [80] above, it is simplistic to approach the trading relationship between a supermarket retailer and its suppliers as one where the retailer has complete and unilateral control over the gross margins it makes because of the retail prices it chooses to offer.
236 As to the thirteenth element ([187] above), I do not think that Woolworths' conduct in implementing the Mind the Gap scheme is fairly characterised as "a try-on". The evidence persuades me that, although Woolworths had identified a number of "opportunities", it realised that, for circumstances that might be special to particular suppliers, it might not be appropriate to make an "ask" for the amount of the "opportunity" shown in an Opportunity Report or, indeed, to make any "ask" at all. This is why the discretion to be exercised by the category managers and buyers was important. Further, Woolworths realised that any "ask" might be rejected or might be the subject of negotiation. None of this means that Woolworths considered its conduct to be "a try-on". Further, as I have said, in the absence of proper evidence, I cannot attribute any particular significance to the fact that Woolworths' target was set at approximately 10% of the total value of the "opportunities" revealed in the Opportunity Reports.
237 In its submissions, Woolworths relied on the application of the discount factor to gainsay the proposition that it had superior bargaining power vis-à-vis its suppliers. It argued that if its bargaining power was so strong, it surely would not have discounted the "opportunities" it had identified by 90%. It developed this submission by arguing that if it had the bargaining power that the ACCC alleged it had then, presumably, it would have expected a much better success rate. I will return to consider the question of Woolworths' bargaining power, which did not feature in the ACCC's thirteen propositions, although it was touched on elsewhere in oral submissions.
238 A number of the elements I have addressed also deal with aspects of the ACCC's written closing submissions. Nonetheless, for completeness I will deal with the written submissions to the extent that it is now necessary for me to do so.
239 With regard to the contention that there was no legitimate basis for Woolworths to seek Mind the Gap payments on the basis of the Opportunity Reports ([157]-[161] above), I reject the ACCC's submission that category mangers and buyers did not consider why the analysis, based on the chosen "lenses", indicated a potential underperformance by a given supplier. The evidence points convincingly in the opposite conclusion. I accept that category managers and buyers were instructed to review the Opportunity Reports and use their discretion in approaching suppliers and making "asks". The category managers and buyers were best-placed to do this in light of their day-to-day relationships with the suppliers. As I have found, Ms Sandercock's evidence illustrates how this instruction was carried out at a practical level.
240 The ACCC's submission that no instruction was given that would explain how a category manager or buyer could judge whether the amount of an "ask" was reasonable or not, is really a diversion. I am satisfied that category managers and buyers needed no such instruction. I repeat, they were best-placed to understand their suppliers' trading performance, as revealed by the data presented in the Opportunity Reports, and to put that performance in context, using their intimate knowledge of the trading relationships concerned.
241 I have already dealt with the submission that there are numerous examples of category managers and buyers using the amount shown in the Consolidated View column in the Opportunity Reports. I do not think that this has the significance that the ACCC attributes to it. If anything, it tends to underscore Woolworths' point that a hallmark of the Mind the Gap scheme was that it was fact-based and that, in making "asks", the supplier should be given facts. Further, I have rejected the ACCC's submission that the Opportunity Reports were a "data artifice".
242 The evidence does not support the ACCC's contention that suppliers made "payments" because they believed that their refusal to make a "payment" would or might jeopardise their ability to access customers through the Woolworths Supermarkets business. This is an inference I was asked to draw, but there is an insufficient basis in the primary facts that would enable me to properly draw that inference. Indeed, I am really being invited to speculate on that matter. I would add that, if it were the case that suppliers made payments on that basis, I would have expected the ACCC to call some direct evidence of that fact. No such evidence was called. I have already dealt with the ACCC's case on "threats" and will not repeat my findings, save to note that the evidence shows clearly enough that when suppliers were not willing to make a "payment", they showed no hesitation in communicating their refusals. This is another example of plain-speaking in commercial relationships. The ACCC's submission that Woolworths could have called evidence to negative the inference which the ACCC asked me to draw, displaces the evidential burden on this question. I draw no such inference from the evidence that the ACCC has adduced. Therefore, the occasion for Woolworths to negative such an "inference" does not arise.
243 The ACCC's submission that the Mind the Gap scheme was a speculative scheme designed to take advantage of vulnerable suppliers ([169]-[170] above), is not supported by any evidence. The ACCC contended that I should infer that this was the reason why Woolworths set its target at a fraction of the "opportunities" identified in the Opportunity Reports. I draw no such inference and repeat the observations and conclusions I have made at [209]-[210] above. I also refer, in this connection, to the observations and conclusions at [253]-[254] below.
244 The ACCC's submissions on "prevailing norms" ([171] above) have been dealt with by my findings at [33]-[81] and [82]-[123] above. The ACCC's reliance on Coles, in this connection, is misplaced. The case presented in Coles is different to the case presented in this proceeding which is, as I have noted, a more broadly-based case divorced from conduct involved in discrete and individual transactions with suppliers.
245 The ACCC's submissions on "legitimate interests" ([172]-[173] above) do not materially advance its case on unconscionability. As I have noted, its submissions appear to be responsive to Woolworths' opening submissions. The ACCC submitted that Woolworths cannot call upon its own commercial interests to justify its conduct. Whether that is so is not a matter that I need address in any detail. Indeed, the parties did not do so beyond alluding in a very general way to the various matters I have already discussed. I will therefore deal with this issue at the level of generality advanced by the parties themselves. The premise of the ACCC's submissions assumes that Woolworths' conduct was at least prima facie unconscionable unless Woolworths' interests were brought into the balance. I accept Woolworths' submission that a party's "legitimate interests" will extend to include its interest in pursuing its lawful business in a profitable way and in a manner that minimises its costs. That, however, is a very general proposition. I also accept the ACCC's submission that it does not mean that a party's legitimate interests extend to cost minimisation or profit maximisation, regardless of the means. It is, of course, "the means" that are in question in this case. I have addressed that question in the preceding paragraphs of this section of my reasons.
246 This then leaves the ACCC's allegation that Woolworths was in, and took advantage of, a substantially stronger bargaining position relative to its suppliers.
247 The ACCC described Woolworths' bargaining power, as against the Tier B suppliers, as "immense". This power was said to be evidenced by the fact that Woolworths felt able to "embark on the scheme". It was also based on the fact that, from July to December 2014, Woolworths ordered grocery products from approximately 4,300 suppliers (although only 821 of these suppliers were Tier B suppliers) and the fact that Woolworths had a 37%-39% share by retail value of grocery sales in Australia. In oral closing submissions, the ACCC also called in aid some additional data recorded in Woolworths' financial report for the half year ending 31 December 2014.
248 The first basis is, as Woolworths pointed out, somewhat circular: I am asked to find that Woolworths' conduct was unconscionable because of (amongst other things) an inequality of bargaining power and, at the same time, infer that there was an inequality of bargaining power because Woolworths engaged in the conduct. Woolworths submitted that the deployment of this reasoning highlights the circumstance that, in fact, there is no evidence of an inequality of bargaining power. For my part, I am not persuaded that it is axiomatic that, as between Woolworths and its Tier B suppliers, there was an immense disparity in bargaining power, as the expression of the ACCC's submission suggested, simply because Woolworths implemented the Mind the Gap scheme.
249 The second basis relies on objective facts. These facts are relevant but limited. They were repeated in the ACCC's written closing submissions. Undoubtedly, the Woolworths Supermarkets business is, and was at the relevant time, "big". There is no doubt that, at the relevant time, Woolworths had a large market share by overall sales value. There was, however, no attempt to move from generalities to specifics. For example, there was no attempt by the ACCC to relate this percentage share to the sales of products supplied by the Tier B suppliers or to identify Woolworths' share of any particular product sold by a particular Tier B supplier. The evidence is entirely silent on these matters.
250 Further, as Woolworths argued, it may have had a significant share of overall Australian grocery sales, but that says little about the significance of Woolworths to a given supplier. A given supplier's business with Woolworths might be small relative to the sales it makes to other persons (including, in particular, Woolworths' key competitors) or, indeed, to the sales it makes in other markets. It also ignores the circumstance that many suppliers will be selling products and/or brands that Woolworths would consider necessary in order for it to be competitive, particularly with its key competitors. If shoppers go to Woolworths and cannot find the range of products or particular brands of products they wish to buy, they may readily switch to other retailers who can provide that offering. As Mr Dower's evidence made clear, there is little loyalty amongst consumers to particular retailers. Therefore, a particular supplier, even a small one, may be as significant to Woolworths as Woolworths is to that supplier.
251 A further, confounding factor is that the ACCC's case concerns Woolworths' conduct directed to Tier B suppliers as a class. As I have repeatedly noted, its case is not directed to particular conduct in relation to a particular supplier involving circumstances peculiar to that supplier. I have identified some of the Tier B suppliers at [86] above. I would not readily assume (and do not assume) that, as between Woolworths and these suppliers, or indeed any of them, there was a substantial difference in bargaining power in favour of Woolworths, let alone an "immense" difference, as the ACCC has argued.
252 There is nothing in the evidence to suggest that, as a class, the Tier B suppliers were, at the relevant time, homogeneous. One cannot say, for example, that the Tier B suppliers were, universally, small suppliers with little bargaining power. Indeed, there is nothing in the evidence to indicate that the Tier B suppliers, as a class, shared any common characteristic concerning bargaining power, other than that they were suppliers to Woolworths.
253 In its written opening submissions, the ACCC referred to the Full Court reasons for judgment in National Exchange, which concerned the making of unsolicited off-market offers to buy shares in a target company for a price substantially below valuation. This conduct was alleged to have contravened s 12CC of the ASIC Act, which prohibited unconscionable conduct in trade or commerce in connection with the supply of financial services. In that case, the Full Court said (at [43]):
National Exchange set out to systematically implement a strategy to take advantage of the fact that amongst the official members there would be a group of inexperienced persons who would act irrationally from a purely commercial viewpoint and would accept the offer. They were perceived to be vulnerable targets and ripe for exploitation, as they would be likely to act inadvertently and sell their shares without obtaining proper advice, and they were a predictable class of members from whom [its controller] could procure a substantial financial advantage by reason of their commercially irrational conduct. …
254 The facts of that case are far removed from the present case. There is nothing in the evidence that would lead me to conclude that there were, among the Tier B suppliers, persons who were inexperienced or who would act irrationally from a commercial perspective. Similarly, there is nothing in the evidence that would lead me to conclude that, in designing the Mind the Gap scheme, Woolworths considered that the Tier B suppliers included "vulnerable targets" who were "ripe for exploitation".
255 In its written closing submissions, the ACCC pointed to other indicia which, it argued, supported the existence of Woolworths' bargaining power. As I have noted, it argued that no supplier had ever sought to approach Woolworths in the way that Woolworths' had approached suppliers in the Mind the Gap scheme, by seeking a "payment" from Woolworths. The ACCC based this submission on Mr Dower's cross-examination, where Mr Dower was pursued on the following line of argument:
Did any supplier ever ask you, in your experience at Woolworths, for a reimbursement in cash such as a Mind the Gap payment going in the supplier's direction?--- Not to my knowledge.
What do you think Woolworths' reaction to such a request would have been?---Well, I think we would have had to evaluate every situation, which we did with all buyers and suppliers. I mean, there was quite often situations where a supplier would come back and say, you know, "This promotion didn't work. That promotion worked. We've overinvested here. We've overinvested there," and have a conversation about the commercials, and that's perfectly normal. Yes, that's part of ongoing discussion.
When, in your experience, has Woolworths ever paid in cash to a supplier a payment like a Mind the Gap payment based upon similar criteria, but operating in the supplier's favour rather than Woolworths' favour? When did that happen?---I think it's very difficult to create the same in reverse.
Why?--- I think - just to finish what I was saying, there are occasions where a supplier might say, "We're coming to our half year end, or we're coming to our year end. Woolworths, you take a lot more stock off me, could you fill your warehouse with stock for me because I'm coming to my half year end?" It's going to be a big cost to Woolworths, we're going to look after all that stock. We're not going to be sell it through very quickly, so it's actually us taking a big cost on behalf of the supplier, but because of the relationship we would often do that. So there are occasions when that would happen, yes.
256 An hypothetical example was put to Mr Dower:
… the supplier would say [to Woolworths] something along the lines of, "I've done this very detailed analysis and I can tell you that I think your gross profit in relation to my products has been excessive in the last period. You've earned an extra [dollar amount]. I'd like some of that. Would you pay it to me in cash, please?" That's never happened, has it?---Well, actually, now you've described it to me, yes, that happens all the time. That's a perfectly normal - because I've been a supplier for 10 years as well, so I've actually had those conversations, where you go to a supplier [quaere, retailer?] and you would say exactly what you've just described … and then you would look at ways that the retailer would need to help you out through that period. So perfectly justified. I worked for Mars for eight years. I remember asking numerous retailers for those exact things. Perfectly normal.
257 In succeeding questions, there was an emphasis placed by the cross-examiner on the receipt of (in his words) "cash, the folding stuff, Mind the Gap payments". This line of questioning was, ultimately, a diversion because it equated Mind the Gap payments with payments of cash when, in fact, the evidence was that Mind the Gap payments were made by adjusting accounts, as I have previously explained. In the course of its oral closing submissions, the ACCC confirmed that this was so.
258 Nevertheless, the cross-examination continued in this vein:
… Mr Dower, can I put this proposition to you, and I will just ask you first to tell his Honour whether you agree or disagree with it, nothing more for the moment, please. The proposition is this: so far as you are aware, no supplier has ever asked Woolworths to reimburse it in cash because it had not recovered sufficient profit in a given period of time because, for example, its gross profit margin had not increased by 20 basis points for every 100 basis points of sales in that period. That's true, isn't it?---Yes, but we would have a conversation around that - - -
Thank you?--- - - - in terms of what would happen next.
And I want to put this next proposition to you: if any supplier - to your knowledge and understanding - if any supplier had come to Woolworths at any time putting that proposition to Woolworths, Woolworths would have responded that supplier was dreaming, correct?---No. Completely incorrect. It would depend on the circumstances and - and depends on where we are in the relationship, in the negotiation. It would depend on many factors - - -
That's okay?--- - - - and it was perfectly reasonable for a supplier - - -
I can live with completely incorrect?--- - - - to ask for money from us. It's a totally normal thing to do. So - - -
Yes. What payments of cash to suppliers have you ever seen while you were there? ---Well, the way - the way it works with a supplier is it's not so much they would come in and say, "I would like some cash, please?" They would come an[d] say, "Actually, we really need some support from you on these areas."
259 When Mr Dower's evidence on this topic is considered in its entirety, I do not think that it provides the support that the ACCC's submissions assume. The effect of Mr Dower's evidence was that, when they considered it appropriate to do so, suppliers would approach Woolworths with a view to asking Woolworths to provide financial support for the supplier's product(s). There are examples of this in the evidence. In responding to an "ask" made under the Mind the Gap scheme, some suppliers put forward their own assessment of their trading performance with Woolworths for the relevant period and, on occasion, made their own proposal for Woolworths' support as part of the negotiation.
260 Thus, making requests for financial support, in whatever form that might take, is not and was not a one-sided affair. If the making of a request for financial support, either by Woolworths or one of its suppliers, is an indicium of bargaining power, then the existence and extent of that power would seem to be dependent on particular circumstances as they affect a particular trading relationship.
261 In the present case, the evidence on bargaining power did not descend to such specifics. The ACCC's case in this regard was confined to the generalities to which I have referred. It is not possible for me to come to any firm view on this question. This is a significant gap in the ACCC's case, although its significance to the outcome of the proceeding is not as great as it might have been had I been satisfied of other facts. This is because, overall, I am not satisfied, in light of all the circumstances brought forward, that Woolworths' design or implementation of the Mind the Gap scheme was unconscionable, as the ACCC has alleged.
262 My analysis has necessarily required me to consider the individual elements and matters on which the ACCC has relied to argue that Woolworths' conduct was unconscionable. However, s 21(1) of the ACL requires me to have regard to "all the circumstances". A piecemeal analysis will not suffice. Rather, I am required to come to a broad evaluative judgment which involves "standing back and looking at the whole episode", as the Full Court said in Lux at [44]. I have arrived at my conclusion by doing this.
263 It may be that some would see Woolworths' conduct in making "asks" and seeking "payments" as unjustified, unfair or unjust according to their own standards of commercial propriety. This, however, is not the proscriptive standard that s 21(1) of the ACL imposes. I hasten to add that I have made no such evaluation myself. I mention these matters only to distinguish the task of the Court from the casual and informal judgments made by others. My task has been to consider the nature of the case that has been pleaded, the evidence that has been adduced, and the legal requirements of s 21 read in light of s 22(2) of the ACL and the authorities describing the operation of these, and like, provisions.