Act now to stop abuse of supermarket power - NFU

UK - The NFU has accused some of Britain’s major supermarkets of abusing their power, creating a climate of fear among suppliers and putting supply chains at risk.
calendar icon 10 June 2006
clock icon 4 minute read
In its response to the Competitions Commission’s investigation of the grocery market the NFU has identified a number of specific examples of malpractice including:
  • Significant upfront payments being demanded by retailers from suppliers in the tendering or re-tendering process – sometimes running to millions of pounds as has happened recently in the dairy and red meat sectors;
  • Suppliers being required to pay retailers an annual payment based on a percentage of their turnover;
  • No written terms of business in place and retailers frequently changing the verbal terms of business at short notice or in some cases retrospectively, including across the board price cuts.
  • Suppliers being required to pay for promotional activity and then having to take a lower price for their product because of the promotion;
  • Short notice changes in volume of product required by the processor or to the specification of product required.
  • Auctions being held to determine who is prepared to pay the retailer the most to be able to supply them.
NFU Deputy President Meurig Raymond said all of the evidence available to the NFU confirmed that most of the issues raised in the previous Competition Commission investigation in 2000 remained unresolved and that the Supermarket Code of Practice had failed.

“There is an obvious and very dangerous imbalance in the supply chain, that the Competition Commission really must get to grips with if serious damage to our food industry is to be avoided”, he said.

“It cannot be in the consumer’s interest for high quality British food producers to be forced out of business by the abuse of supermarket power.”

The NFU’s response also highlights the climate of fear and oppression that exists amongst suppliers.

Mr Raymond said: “We have spoken to many of our members on this issue and no one was prepared to be identified in our submission to the Competition Commission because they feared that the could lose current contracts.

“This demonstrates very clearly to me the level of fear that exists and the dominance that the retailers have in the market place which creates an imbalance of negotiating strength which the retailers can, and do exploit.”

The NFU has also expressed its fear that these activities, if left unchecked, will damage consumers.

Mr Raymond said: “The current pressure on the domestic supply chain is unsustainable if we are to maintain the high quality, unrivalled choice and availability of British food for consumers. We fear if the pressure continues to be placed on suppliers irrecoverable damage could be done our supply chain and this cannot be in public interest.

Mr Raymond said: “The NFU wants to see a sustainable food supply chain that offers consumers choice, high standards and good availability of food. To enable this we need a properly functioning market place that is transparent and where genuinely competitive supply chain arrangements exist.”

The NFU's full response is attached below as a related document.

Related Document

- The response of the NFU to the Competition Commission investigation of the grocery retail market

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