Stop the bullies

After two years of investigation, the Competition Commission finally announced a swathe of measures designed to curb the purchasing power of the supermarket giants on 30 April.

Some groups like the Association of Convenience Stores and the FSB feel let down by the commission, but suppliers to the supermarkets are entitled to feel a lot happier.

The Competition Commission came to the conclusion that supply chain practices that transfer excessive risks and unexpected costs to suppliers are prevalent in the grocery sector, and have the effect of reducing supplier profitability and hurting cashflow.

As a result, grocery retailers are prohibited in the future from making retrospective adjustments to terms and conditions of supply.

This is a strong statement from the commission.

But if such a body can see the unfairness of such trade practice in the grocery trade, why should officialdom be willing to watch it continue in other trade sectors, where retailers abuse their purchasing power in similar ways?

A whole raft of organisations including Debenhams, BHS, and Boots have been criticised in recent times for unilaterally extending its payment terms to suppliers from 30 days to 60, or even 75 days.

If Tesco and Asda won’t be able to do this in the future, why should other organisations with similar purchasing power in other industries be allowed to do so?

Tesco-bashing has become a national sport in recent years, but no-one should think that the supermarkets are alone in examining ways to boost profitability at the expense of suppliers, in order to provide the best possible prices for consumers.

An ombudsman with powers to take up anonymous complaints into unfair trade practices and levy financial penalties will be installed in the grocery sector as a result of the CC’s investigations, but why should this industry be singled out for this treatment?

I believe it’s time for all large corporations to live up to the promises made in their glossy corporate social responsibility brochures, and treat suppliers as valued and important stakeholders in their businesses.

Pay to terms, and stop earning interest on supplier’s money that should rightly be residing in someone else’s bank account.

Martin Williams is MD of Graydon UK and blogs for Accountancy Age at riskybusiness.accountancyage.com