Why some Australian clothing brands may not have enough cash to pay their suppliers

AUSTRALIA’S apparel industry is set to see a major shakeup this week after a federal government-appointed committee recommended that some brands may have too little cash to cover the cost of their suppliers.

Key points:The Federal Government will look into whether suppliers are overcharging consumersThe report recommends some companies should be required to pay suppliers the full cost of the items they produceAAP/ABC News 7:30’s Amanda McEwen reports from Melbourne and the ACTA convention centre.(ABC News)It’s been two months since a parliamentary committee found that some Australian apparel brands were overcharging customers for items they were producing.

Key factsThe report recommended that the Federal Government should look into the matter, and that the Australian Council of Trade Unions (ACTOU) and the Australian Consumer Law Reform Group (ACLCG) should consider whether some companies were over-charging consumers.

The Federal Industry Minister, Mark Butler, said the review would look at the “cost of production, the quality and safety of the goods, the time and expense of delivering the goods and the impact of the overcharging on consumers”.

“I am extremely concerned by the overcharge that some of our suppliers are putting on their suppliers and customers and that will be an issue we will look at,” he said.

“We will take the advice that ACTOU and ACLCG give us.”ACTOUS spokesman Kevin Whelan said the committee report was “extremely disappointing”.

“While we respect the Committee’s recommendations, the ACTOUS strongly disagrees with the decision to require some companies to pay a significant amount of money to suppliers, and believes that suppliers should be responsible for all of the cost,” he told the ABC.

“In addition, we would like to make clear that we have no plans to change our suppliers’ contracts or reduce their contracts with suppliers.”ACLCGs submission to the committee included the view that some companies had been “misleading consumers about the quality of their products”, and that suppliers were “unnecessarily and unlawfully charging consumers.”

“Many of the companies that we recommend will now have to pay the full price of their goods if they are to continue making the goods available to the Australian public,” it said.

Mr Butler said the Government would be looking at the issue “with the assistance of the ACLCGs”.

“We are also aware that suppliers are making significant profits from our apparel business, and as part of our strategy we are working to increase competition in the apparel industry,” he added.ACLCAG chief executive Mark Taylor said some companies may be overcharging their suppliers, but he was not surprised by the committee’s recommendations.

“This is not a new issue,” he explained.

“For example, if a company is producing a garment and you’re selling it for a reasonable price, the supplier should be paying you the price of the garment, and it is not just about that garment.”

So the issue is not so much about what the suppliers are doing.

It’s about what they’re saying about the garments they’re producing, the colours they’re using, the way they’re stitching their clothes, how much they’re charging for their goods.”ACCLAG is concerned that the issue could impact on consumers, because retailers would not be able to use the “shopping mall” as a “piggy bank” to pay for their suppliers’ costs, he said, but it was “quite difficult to see how they would be able, if they were doing that, to make that purchase”.

The committee report found that the major suppliers of apparel to retailers were Woolworths, Aldi, H&M, Sainsbury’s and J Crew, but that some suppliers were charging consumers “a significant amount” more than what was actually charged for the products.

The ACLC group has called for the government to “take the strongest possible action” against suppliers, saying the costs could have an impact on the economy.”

In an email to the ABC, Woolworth’s general manager of corporate affairs, Mike Smith, said he was “satisfied” with the committee recommendations, and hoped the review “could result in more cost certainty for consumers”.”

That is not fair to consumers, and unfair to the retailers and suppliers who produce the goods.”

In an email to the ABC, Woolworth’s general manager of corporate affairs, Mike Smith, said he was “satisfied” with the committee recommendations, and hoped the review “could result in more cost certainty for consumers”.

He said Woolworth would continue to “make sure that suppliers meet the highest standards for the way in which they produce their products”.

“It is important that suppliers continue to meet their obligations to the consumer when they provide goods and services to Woolworth customers,” he wrote.

“While some suppliers may not be paying the full retail price for products they are producing, these are the lowest prices available to Woolies customers, and they provide quality and value for our customers.”ACLAG is urging the Government to “ensure that all companies that produce