Watchdog to police supermarket late payments
Under provisional decisions handed down by the commission last week, an extended code of practice would be set up and an ombudsman created to police supermarkets' late payments to suppliers
Supermarkets that routinely withhold payment from suppliers could be forced
to change their practices in future if the Competition Commission’s
recommendation for an ombudsman is adopted.
Suppliers often face cashflow problems as supermarkets frequently pay only
part of their invoices on time and dispute other parts, or apply retrospective
changes to the agreed terms of supply.
Under provisional decisions handed down by the commission last week, an
extended code of practice would be set up, and an ombudsman created to police
it.
A commission spokesman said that while there is a system that deals with
disputes, it is not being widely utilised and the commission felt an independent
arbitrator was necessary. But the proposals to force supermarkets to pay within
30 days were rejected as ‘too interventionist.’
‘However, anything that falls under the supplier supermarket relationship
could be dealt with under the overriding fair dealing clause we have included,’
he said.
The provisional decisions also include recommendations that supermarkets
cannot make retrospective changes to terms without agreement and financial
penalties for non-compliant retailers.
Martin Williams of credit reference agency Graydon was among those who made
submissions. He said the ‘pay and deduct’ practice was of particular concern to
suppliers.
‘They abuse their power by disputing part of an invoice and leaving the
supplier waiting for the rest of their money,’ he said. ‘Time will tell if the
proposed ombudsman has any muscle,’ he added.
Tesco executive director for corporate and legal affairs Lucy Neville-Rolfe
said: ‘An ombudsman could be bureaucratic and an unnecessary cog in a supply
chain that has worked well for consumers.’