Small suppliers are to be protected from being ripped off by large chain commercial property supermarkets under measures to be revealed in the Queen’s Speech later today. Her Majesty will point out the struggles small suppliers face in obtaining a fair price for their produce from the “Big 4” commercial property supermarkets, namely Tesco, Sainsbury’s, Morrisons and Asda.
A voluntary code, which has been described as “toothless”, currently attempts to ensure fair prices for farmers and suppliers. However, despite the fact that the Big 4 have all signed the deal, it appears to have had little impact. Therefore, the decision to scrap the deal in favour of binding legislation has been made.
The new Groceries Code Adjudicator Bill will allow suppliers who feel they have been ripped off by a retail commercial property to act as anonymous whistleblowers, and will apply to both international and British suppliers. Should a complaint be registered, an independent adjudicator will then investigate the case further and see if the commercial property chain in question has breached their agreement. However, the law will only apply to retail commercial properties with an annual turnover of £1 billion or above.
Naming and shaming any offending commercial property supermarket appears to be the main deterrent, as bad publicity can negatively affect sales and the company’s relationship with its customers. However, other measures such as fines will also be available in more serious cases.
The overhaul in the law was deemed necessary after continuous cases where commercial property supermarkets were accused of attempting to rip off suppliers. This mean that suppliers were forced to pay for promotions in the commercial properties selling their goods and even trying to change the terms of an agreement after a deal had been struck. Additionally, the issue of late payments has left some small suppliers struggling to keep their heads above water.
A senior Government source spoke about the new Bill, saying; “This is about redressing the balance between David and Goliath. We want to give the Davids more power to ensure they are getting a fair deal.
“This will address the dominance of the supermarkets and do away with the climate of fear that existed before.”
For several years, the question of whether reform was needed to combat unfair deals offered by commercial property supermarket chains to small suppliers has been raging. It escalated last year, following the “Big 4” slashing the price of milk to the price of bottled water – in other words, 44p per litre or 25p per pint. This meant that dairy farmers were often paying more for production than they would receive upon selling the pasteurised milk on to the commercial property.
A similar story arose with pig farmers, who struggled to cope with the rising cost of feed for their animals. Commercial property supermarkets refused to pay more to reflect the financial difficulties on farmers; instead, they attempted to lower their offer to increase their profit margins.
Part of the problem seems to be the comparatively cheaper costs of importing fruit, vegetables and meat, rather than buying from British suppliers. Industry experts claim that small suppliers suffer bad deals in silence for fear of committing “commercial suicide”, as large chains can afford to look elsewhere for their goods.
As a result of this, the Grocery Market Action Group claims that over 3000 farmers and related suppliers have been forced to liquidise in Britain alone.
However, supermarket commercial properties and the British Retail Consortium (BRC) have responded to the proposed Bill with anger, claiming that larger stores will be forced to raise prices significantly if the new law is passed in Government. This, of course, will have a knock-on effect upon the consumer, and with inflation outstripping the pay rise year by year, can the British public really afford to be fair?
What do you think? Are you a supplier to a supermarket and believe your business will suffer if these proposals are not passed? Or do you think that in times of recession, everyone should tighten their belts and make the best they can out of a bad deal?
