Safeway supplier accused of ignoring code in cash row

27 February 2003
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27 February 2003 | Robin Parker

Supermarket Safeway has accused a major supplier that complained it had been unfairly treated of ignoring an agreed disputes procedure.

The supplier said Safeway had unfairly demanded large payments at short notice.

The move comes as the Office of Fair Trading (OFT) begins its first review of the supermarkets' code of practice, which was introduced last March to help settle disputes between the UK's four biggest grocery retailers and their suppliers.

Supermarkets and supplier groups have until the end of March to report their experiences of the code and propose any changes to the OFT.

The anonymous supplier wrote to retail trade magazine The Grocer saying that Safeway had breached the code of practice by demanding a six-figure payment ahead of its contract renegotiations next month.

"We have got used to de-listing threats and extra payments as Safeway's year-ends approach, but this year-end has been exceptional," the letter said.

But Safeway said asking for such payments was fair, and that it was not uncommon to ask for six-figure payments from top-end suppliers.

Kevin Hawkins, the store's director of communications, said no supplier had written to Safeway about any problems, which has been an agreed part of the supermarket's terms and conditions for its 1,500 suppliers since the code came into force.

"Suppliers with complaints have to follow this formal procedure, and the OFT would not entertain its complaint until it did," he said. "We're not putting additional demands on suppliers but assessing their performance and negotiating mutually approved payments six to eight weeks ahead of potential contract renewal, which is normally enough to agree terms."

No disputes have yet been brought before the OFT under the code.

Robin Tapper, head of marketing at the National Farmers' Union, said suppliers were caught in a "climate of fear" in which no individual was prepared to speak out because they worried about being penalised.

Supplier groups continue to call for the code to be extended beyond the supermarket chains and into such areas as catering.

The OFT is currently considering whether bids for Safeway's 480 stores are anti-competitive.


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