1. Business
March 22, 2017

Watchdog reveals supermarkets hold firm grip over suppliers

Charging suppliers for customer complaints and bullying them into buying charity tables; supermarkets have been throwing their weight around.

The office of the GCA, also known as the Supermarket Ombudsman, was created by the Groceries Code Adjudicator Act 2013 to interpret and enforce GSCOP, as well as generally regulating the relationship between the 10 largest supermarkets in the UK and their suppliers.

The office has largely been seen as successful within the industry, but speaking at a Westminster Food & Nutrition Forum Seminar at the beginning of March, the current and first GCA, Christine Tacon, highlighted some surprising and suspect practises that demonstrate the power supermarkets hold over their suppliers, including charging up to £55 for each consumer complaint, and suppliers being heavy-handedly coerced into buying expensive tables at charity events.

Supermarkets’ shady dealings

“If you take back a bag of apples to the retailer, which the retailer has no doubt paid about 50p for, and you say one of my apples was bad, they will give you another pack of apples, but they will trace that all the way back to the supplier and charge them anything up to about £55 for the fact that there has been a complaint,” explained Tacon.

This is fortunately an area where the GCA has been able to make significant headway, with the office reporting that most retailers have reduced such charges, down to as little as £13, or eliminated them entirely, particularly if they are resolved in-store. Still, there are many more issues facing the sector, with the GCA generally giving precedence to what are seen the five most pressing concerns at a time.

According to Tacon, the most significant problem currently facing suppliers is one that has caused a lot of grievance for quite some time: incorrect deductions from invoices.

“If the supplier thinks they’ve given you a certain amount of product and the retailer says, ‘No, I don’t think you did’, they just deduct from the invoice, or if they don’t agree with the supplier’s price they just put [the retailer’s] instead and just deduct it from the invoice.”

This was an area where the GCA found Tesco in breach, though Tacon does report that since the issue has been raised, the retailer has made a concerted effort to resolve the problem. Fortunately, the GSCOP is worded quite broadly, so despite section 5 of the code being drafted to avoid unnecessary delays in payment, the invoice matter could also be filed under this heading, and therefore be acted on fairly promptly.

One of the more suspect practices reported upon comes under the title of ‘pay to stay’. While this is quite a complex topic, with many suppliers seeing requests of a lump sum payment from retailers alongside their margin proposals as asking for payment to stay on the retailer’s books, retailers for the most part see this as part of the tender. The problem though, reports Tacon, is the altogether more shady dealings surrounding charity balls and the like.

“Retailers will have charity balls and ask for rather large sums for people to host a table,” says Tacon. “They’re coming under some pressure from third parties, saying ‘If you don’t take the table, your name will be on the list to the chief executive of those who are not supporting our charity.’”

Such dealings highlight the power supermarkets feel they hold over their suppliers, proving the importance of the GCA’s role and the need suppliers have for an official and impartial ombudsman on such matters.

 

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