Labour calls for ban on payments to remain on supplier lists

Will Green is news editor of Supply Management
5 December 2014

The Labour Party has called for the practice of firms being asked to make payments to remain on a company's supplier list to be outlawed.

The opposition has spoken out after the BBC reported suppliers have been asked by Premier Foods for payments or allegedly face “de-listing”.

Toby Perkins, Labour’s shadow business minister, said his party had attempted to make an amendment to the Small Business, Enterprise and Employment Bill currently passing through the House of Lords outlawing such payments, but it was voted down.

“Labour pushed to outlaw companies charging to stay on their supplier list,” he said. “But, alongside steps to prevent customer late payment, they were rejected by the government.

“Building a stronger economy relies on free and fair markets, but where unfair practices emerge, government should be willing to take action as today’s revelations appear to expose.”

Last year, Premier Foods launched a project to halve its 3,300 suppliers and asked firms to contribute to its “invest for growth” programme.

In the firm’s 2014 mid-year results it said “good progress has been made on the supplier reduction programme”. “The number of suppliers is planned to reduce by over half to a new level of 1,350,” said a report.

A Premier Foods spokesperson said: “As part of the [invest for growth] programme, our suppliers are asked to make an annual voluntary investment to help fund our growth plans. In return, our suppliers benefit from opportunities to secure a larger slice of our current business. They also stand to gain as our business grows in the future.

“Not paying a contribution does not automatically mean Premier Foods will stop using a supplier. Price, quality, reliability and service are also all important criteria. Participation in the invest for growth programme is one factor that Premier Foods take into account in supplier selection, but the other criteria are also important.”

The company provided a list of positive comments from suppliers, including one from Colin Maher, general manager of Sartorius Intec, a provider of laboratory and process technologies and equipment, who said its business with Premier Foods had grown from less than £20,000 a year to around half a million pounds since making a payment.

“As a supplier I can say that to me this is no different to us spending money on marketing, but the return on investment against any previous spend on marketing has been significantly higher over a shorter period of time,” he said. “If at the same time we can ensure the future growth of both companies then this can only be a benefit.”

The Department for Business, Innovation and Skills (BIS) said the Competition and Markets Authority would be looking at the issue to “ensure that businesses are not being badly treated when dealing with larger companies”.

A BIS spokesman said: “We take supply chain issues seriously and have addressed the relationship between the large supermarkets and their direct suppliers through the creation of the Groceries Code Adjudicator.

“As part of the Small Business, Enterprise and Employment Bill we are currently consulting on the best way to address payment practices more broadly. We have asked for views on the ‘preferred supplier’ approach, which can cause difficulties for smaller businesses.”

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