Woolworths in murky territory over “voluntary levy”

Woolworths’ use of a “voluntary levy” to help fund its marketing campaign featuring celebrity chef Jamie Oliver has been labeled as “very unusual” by a leading competition lawyer.

Dr Alexandra Merrett, formerly a senior enforcement lawyer for the competition watchdog, told Dynamic Business that it was “really weird” to impose a voluntary levy on suppliers within the context of an ongoing commercial relationship.

A brawl has broken out in recent weeks between the supermarket giant and industry group AusVeg over Woolworth’s voluntary levy on suppliers of 40 cents per crate to help fund its latest media campaign.

The levy was imposed on top of the already existing 2.5 to 5 per cent marketing levy growers already pay. AusVeg spokesman William Churchill told Dynamic Business the levy was “incredibly unfair” particularly given Woolworths had posted a net profit of $1.32bn in February.

Woolworths has defended the levy with spokesman Russell Mahoney telling media outlets the campaign benefited the whole fruit and vegetable industry and that participating growers were paying less than 2 per cent of the cost of a case of produce. He said that half of Woolworths’ growers felt comfortable opting out of the proposal and rejected suggestions of strong-arm tactics.

However, AusVeg said low profit margins meant the 40 cent per crate levy had cost some growers hundreds of thousands of dollars and was eating into profit margins by 30 to 40 per cent. A complaint has made with the Australian Competition and Consumer Commission.

“If 50 per cent of my growers had signed up to something I thought was fantastic I would say that is an extremely poor success rate,” Mr Churchill said.

Dr Merrett told Dynamic Business there was nothing strictly wrong with imposing a voluntary levy, but said it was interesting that only fifty per cent of growers had signed-up. She said that further information on the suppliers who signed up to the proposal would help shed light on Woolworths’ conduct.

Dr Merrett suggested it was possible smaller operators without a strong pre-existing relationship with Woolworths may have felt more compelled to agree to the levy.

“In a commercial relationship a voluntary levy is an unusual concept. If Woolworths decides that the Starlight Foundation is its favourite charity and says to its suppliers we would really like you to donate to them, that’s really weird,” she said.

“I would like to understand who is paying it. I wouldn’t be the least bit surprised if the smaller operators say ‘I don’t feel I have a choice here and cough up the money’”.

Outgoing Nationals Senator and small business champion Ron Boswell also took aim at Woolworths last night, saying the Competition and Consumer Act needed to be toughened up.

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