There's a big difference between something being legal and being morally right. That's demonstrated by Woolworths' win in the Federal Court against the Australian Competition and Consumer Commission over the retail giant retrospectively squeezing suppliers to make up for its profit shortfall.
It turns out that, under existing Australian competition law, Woolworths did nothing illegal by telling suppliers to cough up extra cash because, in Woolworths' opinion, the suppliers had been doing all right and Woolies needed the money to meet its failing profit forecasts.
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Wooworths ends SPC contract
Woolworths confirms it will cease to continue purchasing its canned tomatoes from SPC Ardmona.
Despite Thursday's legal win, Woolworths as good as admitted the difference between legal and moral at its annual general meeting last month. Chairman Gordon Cairns defended his company's decision to fight the ACCC while effectively acknowledging its treatment of suppliers had not been right.
"We defended it because our view was we were not guilty of unconscionable conduct but we'll hold ourselves going forward to higher standards," he said.
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Why would a company need higher standards unless its previous standards were too low? That comes as no surprise to suppliers.
Cairns became chairman in September last year. The dubious deeds that led to the ACCC action took place in late 2014, allowing the new broom to sweep.
Cairns also has the perspective of having run a Woolworths' supplier. He was CEO of Lion Nathan from 1996 to 2004 when Woolworths and Coles were ripping margins out of liquor suppliers.
Lion Nathan was and remains a much stronger and tougher company than most of the suppliers Woolworths was leaning on in 2014. Lion Nathan also has the benefit of a parent with very deep pockets. Many of Woolworths' local suppliers could be sent broke if our biggest supermarket chain dropped them.
Woolworths has plenty of form mistreating suppliers, though it's rare to find a supplier game to go on the record about it.
Most of that mistreatment has been legal, but not all of it. In 2002, the company fought an ACCC case on price fixing and abuse of market power all the way to the High Court – and lost. On that occasion, involving a Woolworths subsidiary trying to stop George Weston supplying competitors, the law and moral behaviour were on the same side.
In today's decision, it seems that they are not. There is a difference though between the rough-and-tumble of highly competitive retailing and the immoral screwing of suppliers.
With the legal limits now decided, it will be a matter of corporate culture how far Woolworths will go on the moral limits. Culture is set at the top of a company – Cairns is promising something better than what has been the norm.
In the meantime, there is little for Woolworths to celebrate about the court win. To have lost would have been particularly embarrassing, as well as expensive, but the win won't change anyone's mind about the morality.
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