Supermarkets using 'shocking tactics' to extract money from suppliers

Supermarkets like Tesco and Morrisons are using “shocking tactics” to extort money from their suppliers, a Government watchdog has claimed.

In one case, a supplier was pressured to spend ?25,000 on a table at a charity ball or risk having their product withdrawn from shelves, according to groceries code adjudicator Christine Tacon.

Speaking on the “power of supermarkets” at a Westminster Forum conference, Ms Tacon reportedly said she regularly hears about stores claiming delivered goods never arrived, asking suppliers to pay to keep their goods on the shelves, and charging the supplier up to ?55 if a customer complains about their product.

She said supermarkets even charge suppliers for absurd and obviously “foolish” complaints.

“I had a supplier who was charged ?45 after someone complained about finding a teabag ‘inside’ an egg, which was ridiculous,” she said, according to a report in The Times.

“I had a supplier expected to pay ?25,000 for a table at a charity ball,” she told the conference. “They come under pressure like being told: ‘Well, if you don’t buy a table, your name will be on a list of people to the chief executive that are not supporting our charity.’ They are also told they can meet buyers if they buy tickets for golf or fishing days.”

Ms Tacon's comments are in keeping with past reports – Britain's 10 largest supermarkets have been accused of exploiting their suppliers for the last two decades.

In 2009 the Government drew up the groceries supply code of practice and in 2013 it created the post of groceries code adjudicator, to oversee dealings between supermarkets and suppliers.

However research suggests the situation may be getting worse, despite efforts to control industry giants. Supermarkets' use of “predatory practices” helped drive more than 150 food producers out of business last year, according to research by accountancy firm Moore Stephens, The Times reports – nearly triple the 56 lost in 2011.

Ms Tacon said she was also launching an investigation into the millions of pounds being stripped from suppliers under “drop and drive”.

This is where perishable food is sent to distributors but some of it does not appear on the payment system, with supermarkets claiming the products were never received.

Ms Tacon said a preliminary investigation of 20 supply firms found they lost ?15m a year to drop and drive – implying far greater amounts lost across the sector’s 8,000-9,000 firms.

She said: “The supermarkets are genuinely not paying for goods that they are selling. If 20 suppliers are losing ?15m then what’s the cost to the industry?”

Another practice which she claims her office is stamping out, involves supermarkets charging suppliers up to ?55 if customers complain about anything, from bruised fruit to not liking a ready meal.

Last year, the Groceries Code Adjudicator (GCA) forced Morrisons to apologise after an email, seen by the Guardian, revealed it had asked suppliers to fund recent investments it had made.

The supermarket had allegedly called dozens of food firms to a meeting where it demanded lump sums averaging ?2m from each to keep stocking their products.