Morrisons breaches groceries code over supplier payments

4 June 2014

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4 June 2014 | Anna Scott

A multi-channel initiative for suppliers introduced by supermarket chain Morrisons has breached the Groceries Supply Code of Practice, according to the government body the Groceries Code Adjudicator (GCA).

The initiative involved Morrisons asking suppliers for an optional ‘multi-channel status’ payment of a set amount per product to offer greater exposure to the suppliers’ products.

The supermarket chain stated to suppliers during the selection process those that did not want to take multi-channel status would not be penalised in any way. But in the process of implementing the new initiative, 67 suppliers who had not yet agreed to participate had funds debited from their accounts.

The GCA stated: “This is in breach of part three of the code – variation of supply agreements and terms of supply. We note that Wm Morrisons Supermarkets plc has since rectified this and reimbursed the suppliers affected.”

However, the GCA accepted Morrisons’ view that the multi-channel initiative was a request to suppliers and not a requirement to pay a listing fee, and so didn’t breach part nine of the code – limited circumstances for payments as a condition of being a supplier.

It stated: “The fee does not have to be paid for a product to be part of the multi-channel initiative. The decision will ultimately be made by Wm Morrison Supermarkets plc as to which products customers are most likely to want through the online and convenience store channels.”

Morrisons said in a statement: "We mistakenly took payments from a small number of suppliers and these were paid back as soon as we discovered the error. We made these refunds without any prompting."

Stuart Padgham, partner at law firm Thomas Eggar, said the case is a further example of the Adjudicator’s stated approach of tackling issues of unfairness in a practical manner and in dialogue with retailers and suppliers, rather than simply relying on enforcement powers.   

“The breach was bought to the attention of the Adjudicator by a trade association” he said. “This is in-line with the Adjudicator’s approach of encouraging the use of trade associations to report such breaches as a way of allowing suppliers to notify it of their concerns in a confidential manner. One can expect further breaches to be uncovered by trade associations. 

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