30th Jan 2015 06:50
LONDON (Alliance News) - UK Business Secretary Vince Cable on Thursday tabled measures in Parliament which will give the Groceries Code Adjudicator powers to fine supermarkets in the UK that breach the Groceries Code in their relationships with their suppliers.
Under the plans, the adjudicator will be able to imposed penalties on the UK's biggest supermarkets, including listed supermarkets Tesco PLC, J Sainsbury PLC and Wm Morrison Supermarkets PLC, of up to 1% of their annual UK turnover.
The penalties depend on the seriousness of the breach of the code of conduct and the new measures will sit alongside existing powers to issue supermarkets with recommendations to improve their future conduct and to 'name and shame' companies that breach the code.
The code imposes on the supermarkets an over-arching principle of fair dealing with their direct suppliers and includes specific provisions governing terms of supply, timing of payments, marketing and promotional costs, and payments as a condition of being a supplier, according to the Department for Business, Innovation and Skills. The code does not govern issues relating to pricing, it added.
"This important final step will give the Groceries Code Adjudicator the power it needs to address the most serious disputes between the large supermarkets and their direct suppliers," Cable said.
The move comes after a report published earlier this month by insolvency specialist Begbies Traynor Group PLC found the escalating price war among big UK supermarkets and discounters has put many smaller food retailers and suppliers at risk of going under.
The Red Flag Alert report from Begbies for the fourth quarter of 2014 found the UK food retailing industry experienced one of the sharpest increases on record in instances of 'significant' financial distress in all sectors monitored. The number of businesses considered to be struggling significantly increased to 4,552 in the quarter, up 58% from the 2,878 categorised this way in the fourth quarter of 2013.
Small food retailers and suppliers have been the hardest-hit casualties of the ongoing price war among supermarkets in the UK, as Tesco, Sainsbury's, Asda and Morrisons attempt to cope with the competition from discount retailers Aldi and Lidl. The supermarkets have been cutting prices and, as a result, have been squeezing suppliers' margins and elongating payment terms.
By Sam Unsted; [email protected]; @SamUAtAlliance
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