Coles has agreed to pecuniary penalties and today apologised for its treatment of suppliers after admitting it had “crossed the line” and engaged in unconscionable conduct.

Suppliers will be eligible for refunds from Coles.

The Australian Competition and Consumer Commission is seeking $3.7 million in penalties in relation to Coles’ Active Retail Collaboration scheme and $6.3 million in relation to claims for payments made against five suppliers in 2011.

Coles had initially rejected the allegations, but in a dramatic turnaround today sought to settle the case with the ACCC in the Federal Court in Melbourne.

The parties were today seeking court approval for the settlement.

Under the proposed settlement with the ACCC, there will also be an independent review of the eligibility of suppliers to receive a refund of certain payments they made to Coles.

Lawyers for the consumer watchdog told the court that former Victorian premier Jeff Kennett had been approached to act as an independent arbiter over refunds from Coles to aggrieved suppliers.

In a statement, the supermarket group’s managing director John Durkan said: “Coles unconditionally apologises and accepts full responsibilities for its actions in these supplier dealings.”

Mr Durkan admitted Coles had “crossed the line” and treated suppliers in a manner “inconsistent with acceptable business practice”.

He agreed with earlier comments by ACCC chairman Rod Sims when the case was first launched that the alleged conduct was contrary to the prevailing business and social values that underpin business standards applying to dealings with suppliers.

Mr Durkan has admitted five suppliers weren’t dealt with properly in relation to Coles demanding payments to help reach profit targets.

“These suppliers were not treated with transparency and respect in relation to these five suppliers.”

The ACCC had launched two court actions against Coles this year.

In mid October, the watchdog claimed the supermarket acted unconscionably when it demanded payments from five food and grocery suppliers.

The ACCC alleged there was no legitimate reason for Coles to demand the money, which amounted to hundreds of thousands of dollars. The allegations go back to 2011.

In May, the ACCC launched its first unconscionable conduct court case against Coles, arguing the retailer used threats to demand payments from up to 200 suppliers in relation to its Active Retail Collaboration program and in contravention of Australian Consumer Law.

Mr Kennett is already overseeing Coles’ treatment of suppliers, in a role unveiled earlier this year.