27 January 2000 | David Arminas
Clothing manufacturer William Baird has announced plans to sue Marks & Spencer for £53.6 million after the beleaguered retailer dumped the firm as a supplier last year.
Baird, which makes lingerie, women's coats and men's clothes for M&S and supplied 7 per cent of the store's general stock, claims there was no suitable termination period that allowed it to adjust to the loss of M&S's custom. It also claims that the store, with which it did not have a contract, prevented it from forming an alliance with another large supplier, Coats Viyella.
M&S denies the allegations and says it will contest William Baird's claims in the courts.
William Baird's action has sent a chill through the retail clothing industry, according to one analyst with 10 years' experience of the sector. "Most clothes suppliers have a pretty low level of regard for contracts anyway," he said. "They are used to being kicked around by the retailer."
M&S accounted for around 40 per cent (£200 million) of William Baird's annual sales. William Baird said it might have to close 14 UK factories, with the loss of 4,500 jobs, when it sends its final orders to M&S in April.
The termination period given by M&S is likely to be the issue in the case of most interest to other retailers, according to Raymond Werbicki, head of litigation at law firm Masons. He told SM: "It's an important case as retailers and suppliers will be likely to look closely at their relationships."
A typical written agreed notice of termination is six, 12 or 18 months. As its relationship with M&S had lasted for 30 years, William Baird said three years would be appropriate.
Because Baird had no written agreement with M&S, the courts would consider several factors, said Werbicki, such as the length of the relationship and any relevant written documents. A settlement could be based on the profits William Baird would have made in a reasonable termination period.
An M&S spokesperson said the store had no plans to offer contracts to its suppliers in the future and the suppliers themselves were not seeking them.
"William Baird has expanded the M&S side of its business in partnership with M&S," a Baird spokesperson told SM. The M&S business was one of only two William Baird divisions. They have no plans to review contracts with other retailers.
The case showed the need for early discussions between companies about such situations, said Neill Irwin, director of Partnership Sourcing, an advisory body set up by the Confederation of British Industry and the Department of Trade and Industry. "We recommend that companies talk seriously about the exit route," he said.
Last October, M&S announced radical plans to save £450 million on its supply chain of more than 100 suppliers by 2002.