9 November, 2020 Chile

Walmart Chile sued for abusive contractual terms

Competition

A food suppliers association, which includes Coca Cola, Nestlé and Unilever, has sued Walmart Chile for allegedly abusing its dominance in the food retail market by imposing unfair contract conditions on suppliers.  

The Asociación Gremial de Industrias Proveedoras (AGIP) accused Walmart of harming competition by forcing suppliers to contract on terms set unilaterally by the supermarket chain, which also includes a fee levied by Walmart. 

AGIP also accused Walmart of forcing its members to centralise supply services, by requiring those businesses to deliver goods to a new distribution centre that Walmart has established on the outskirts of Santiago.

The association filed its lawsuit before the Tribunal for Defence of Free Competition (TDLC) on 22 October and it was made public on 28 October.

By restricting the freedom of suppliers to contract supply replenishment services on their own terms, Walmart can favour its own products over rival brands, AGIP argued. It added that forced centralisation of supply means that companies with a national distribution network must bear additional costs to deliver goods to another centre.  

AGIP claimed that Walmart imposed these unfair contractual terms to compensate for the company’s recent profit losses. It said Walmart has suffered because of the covid-19 pandemic and the termination of its proposed acquisition of online grocery delivery company Cornershop. 

The association added that Walmart’s supermarkets were looted during massive nationwide protests and riots in October 2019 over the increased cost of living.

AGIP is calling on the TDLC to find that Walmart’s services should be voluntary and not forced on suppliers. It also asked the court to recognise the right of suppliers to terminate service agreements. 

The association added that Walmart should implement an independent adjudicator to solve disputes with suppliers.

Matias Palma, a senior associate at Philippi Prietocarrizosa Ferrero Du & Uría in Santiago, said that the appointment of an arbitrator would be especially useful considering the bargaining power of the parties involved and the conditions of competition in a market that is undergoing great changes because of the growth of Chile’s e-commerce market as a result of the pandemic. 

According to a report by Chilean newspaper La Tercera on 30 October, not all members of AGIP agreed with the lawsuit. The report claimed that multiple companies, including Unilever, P&G and Agrosuper, have removed themselves from the complaint. Unilever’s general manager, Nuria Hernández, also reportedly resigned from AGIP’s board of directors.

Walmart and AGIP did not respond to a request for comment.

 

Counsel to AGIP

Garrigues

Counsel Mario Ybar in Santiago

Counsel to Walmart Chile

FerradaNehme

Partner Nicole Nehme in Santiago

Source: Global Competition Review (GCR)

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