Question 5

HiFi Electronics (HiFi) is a national chain of retail businesses that specializes in selling small electronic goods, computers, mobile phones, and cables and accessories, and is in fact the largest retailer of laptops in Australia.  HiFi has long term supply contracts of 5 years or more locked in with all of its suppliers.

HiFi regularly discounts products and advertises those discounts heavily across all forms of media, spending approximately $1,000,000 per month on advertising. HiFi is looking for ways to increase profits and the marketing team suggests that HiFi require the suppliers whose products feature in the advertising to contribute to the advertising costs. Management agrees.

When HiFi makes the next monthly payments to its suppliers, it deducts an amount from the total owed to each supplier called ‘advertising and promotions supplementation program contribution’. Management is happy because this results in HiFi deducting $1,500,000 from payments to suppliers, increasing HiFi’s profit by the same amount. 

Some suppliers objected to HiFi deducting money for the advertising and promotions supplementation program contribution. HiFi accounts staff were instructed by management to tell any suppliers who complained that HiFi would terminate contracts with them.

Advise the ACCC about whether it would succeed in an action against HiFi for unconscionable conduct under Australian Consumer Law. Do not discuss other actions under ACL or contract law. 

Refer to specific sections of the ACL to support your analysis.