Sainsbury's Supermarket Suppliers Dispute Highlights Wider Problem
03/03/05

The current dispute between supermarket Sainsbury's and their suppliers highlights the frequent breakdown in trust in the relationship between the major retailers and suppliers, according to NFU Scotland.

In January, Sainsbury's wrote to a large number of its suppliers to say its payment terms would be changed from 7 March. As a result of the serious financial impact this could have on suppliers, the matter was raised with the Office of Fair Trading (OFT) by the NFU and Fresh Produce Consortium.

The OFT has today welcomed Sainsbury's plans to write to suppliers stating that it will put a halt on the planned extension to payment terms until a dispute resolution process is complete. The OFT believes the mediation process in the Supermarket Code of Practice is the vehicle to resolve the dispute over payment terms if a settlement cannot be negotiated. However, NFUS has again highlighted the need to completely overhaul the Code and pointed out that not a single complaint has ever reached the mediation process because of the fear of reprisals amongst suppliers.

NFUS President John Kinnaird said:

"When the relationship between supermarkets and their suppliers works, it works well. But there are too many instances when there is a complete breakdown in trust between the two parties, and this has become more frequent as the major supermarkets have increased their market share. This latest attempt to impose new terms on suppliers by Sainsbury's highlights this massive problem.

"The OFT's advice to use the mediation process in the Supermarket Code would be welcome if there was any evidence that the process actually addressed these problems. But in the three years since the Code was introduced, not a single complaint has ever reached this stage. The OFT itself has recognised that the fear from suppliers of being delisted by supermarkets if they complain is the reason this process has never been used.

"When the audit of this Code comes out in the next few weeks, it must be the first step in a serious revamp. It needs to cover the whole supply chain, not just the big four supermarkets and their direct suppliers. Crucially, it needs to be actively enforced. The current approach of waiting for suppliers to publicly complain is useless given the fear they have of retailer reprisals.

"In a food sector marked by an increasing concentration of power at the retail end, a real check in the system is needed. We simply don't have that at present. To rebuild trust and transparency between farm gate and supermarket shelf, government and the competition authorities will have to address this issue."