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
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
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
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
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
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