Scotland’s farming union has reacted with fury to reports that Asda is demanding lump sum payments from its suppliers, apparently to pay for its current price-cutting exercise. NFU Scotland has accused the supermarket of jeopardising the future supply of Scottish food as a result of its financial pressure.

NFUS has spoken with some of Asda’s Scottish suppliers, across a number of commodities, who are facing a potentially disastrous financial squeeze from the supermarket. This includes demands for lump sum payments which NFUS believes are likely to run into six and seven figures. Asda has already announced price cuts of £360 million this year to try and rebuild its slipping market share. Enforced loyalty payments are banned under the OFT’s Supermarket Code of Practice.

NFUS has blasted the supermarket for exploiting its position and has emphasised that this demonstrates the importance of an Office of Fair Trading Inquiry into the misuse of supermarket power. NFUS believes that as well as thousands of family farms being jeopardised, Scotland’s world class food industry is threatened by the misuse of supermarket power and the ultimate losers will be consumers.

NFUS President John Kinnaird said:

“Asda is strangling its suppliers and farmers and is sticking two fingers up to the competition authorities. If the OFT still doesn’t have enough evidence of misuse of supermarket power and breaches of the supermarket code then it should read the latest press reports. It should also offer protection to suppliers so they can give evidence.

“Frankly, this latest move makes a mockery of Asda’s pledge to invest in its business through its own margins. It is doing exactly the opposite and asking its suppliers to pick up its bills for attempts to win market share which appear to be acts of desperation. Whilst I’m sure Asda will state that these payments are ‘voluntary’, it must answer to the reports that it plans to label suppliers as ‘superior, complacent or underperforming’ depending on whether they pay these lump sums.

“The potential impact of this kind of misuse of power is horrendous. It is Asda shoppers and consumers across the country that will lose out when the supply of quality Scottish food is snuffed out because prices are driven down to unsustainable levels. We have seen just this week, Scotland’s last pigs processing plant threatened with closure and the loss of 1000 jobs if it loses a week’s production because of the Unison strike. That demonstrates that much of our food industry is working on a knife-edge as a result of price squeezes from unscrupulous retailers.

“The OFT cannot side-step this issue any longer. It would be negligent not to include a thorough investigation of the treatment of suppliers and its impact on consumers within a new inquiry into the grocery sector. NFUS together with the other UK farm unions will be making approaches to the OFT in the coming days to that end.”

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