Wednesday, December 20, 2006

ACCC seeks fine for WoolWorths

The Australian Competition & Consumer Commission (ACCC) is seeking a fine of $A16m for Woolworths (ASX:WOW).

The retailer is accused of breaching trade practices law by blackmailing small liquor stores into co-operation with it in return for Woolworths dropping objections to license applications.
The legal team for the company has argued in the Federal Court that a penalty of $A2m should be adequate, pointing out a previous case in which rival Coles had been fined $A4.75m in 2005. The lawyers also noted that the behavior now being punished was an industry-wide practice at the time.

You have to love their argument ... Our competitors did it so that makes it ok. The last time I heard a similar excuse is from a small child when they got into trouble "But Jimmy did it". Woolworths should have known this was not an ethical stance to take. I believe blackmail should be deterred as harshly as possible.

Whether the board of directors knew about the blackmail is another thing but those responsible should be dealt with and punished and should not be allowed to use a "He did it too" defense.

The market hasn't reacted badly to the news as Woolworths (ASX:WOW) is currently up 35c on the day to $22.95. At this price the company is overpriced and not worth considering.

Good Luck Investing.

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