The Federal Court ruled in favour of a settlement between the retailer and the consumer watchdog, agreed by the parties last week.

Justice Michelle Gordon said the behaviour by Coles was orchestrated and relentless and involved threatening harm to suppliers by unlawfully withholding funds or demanding payments.

Coles will enter an enforceable undertaking with the Australian Competition and Consumer Commission to establish compensation for up to 200 suppliers - a process that could cost the retailer a further $26 million.

Justice Gordon said Coles' actions were  serious, deliberate and repeated.

"Coles misused its bargaining power. Its conduct was not done in good conscience," she said.

The settlement ends two court battles involving unconscionable conduct claims brought against Coles in May and October this year following a two-year investigation.

The more recent case involved the retailer using its market power to demand money unlawfully from suppliers for matters that were out of their control, including wasted products, in-store markdowns and late delivery.

In one instance it demanded frozen food manufacturer Colonial Farm pay 100 per cent of the costs of waste, despite the supplier struggling financially.

The May action involved an unlawful "rebate" that Coles made suppliers pay to fund the cost of a supply chain program called Active Retail Collaboration (ARC).

Coles has agreed to refund smaller suppliers that were forced to pay extra rebates to fund the cost of the program.

A compensation process will include a review of up to 220 suppliers with combined sales of $660 million. It will be led by former Victorian premier Jeff Kennett, who was hired by Coles in August to oversee its supply charter.

Coles initially denied allegations of unconscionable conduct and said it would defend both cases.  Former Coles managing director Ian McLeod said in October the retailer would be vindicated.

It also issued a statement saying communication between Coles and suppliers were not threats but the subject of normal topics for business discussions aimed at improving the profitability of products.

"Empty shelves are a major source of customer frustration. Coles' team members were working hard to get products on shelves," it said in October.

But last week Coles managing director John Durkan admitted Coles had "crossed the line".

"Coles sincerely regrets and apologises for its conduct in these dealings," he said.

He said on Monday the retailer accepted responsibility for its actions in the supplier dealings.

ACCC chairman Rod Sims said the judgment sent a clear signal to businesses about dealing with smaller suppliers.

"This is a very significant outcome for the supermarket sector and the business community in general," he said.