The Australian Competition and Consumer Commission (ACCC) has alleged retailer Woolworths (ASX:WOW) engaged in "unconscionable conduct" with its suppliers, and is taking the matter to the Federal Court.

The ACCC alleges that in December 2014, Woolworths designed a "Mind the Gap" scheme to seek AUD$60.2 million in payments from 821 "Tier B" suppliers to its supermarket business, in a bid to cut an expected profit shortfall.

The commission alleges the company's category managers and buyers contacted a large number of these suppliers to provide payments of AUD$4,291 to AUD$1.4 million in support, under circumstances where Woolworths had a much stronger bargaining position.

"The ACCC alleges that Woolworths' conduct in requesting the Mind the Gap payments was unconscionable in all the circumstances," ACCC chairman Rod Sims said in a release.

"A common concern raised by suppliers relates to arbitrary claims for payments outside of trading terms by major supermarket retailers. It is difficult for suppliers to plan and budget for the operation of their businesses if they are subject to such ad hoc requests.

"The alleged conduct by Woolworths came to the ACCC's attention around the time when there was considerable publicity about the impending resolution of the ACCC’s Federal Court proceedings against Coles Supermarkets for engaging in unconscionable conduct against its suppliers," Sims said, emphasizing the two cases were separate.

The ACCC is seeking injunctions, including an order requiring the full refund of the amounts paid by suppliers under the Mind the Gap scheme, a pecuniary penalty, a declaration, and costs.

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