Date(s) - 5th September 2017
12:00 am - 12:15 am

Asda forced to repay suppliers after breaching fair dealing code

Grocer breached ‘overarching principle of fair dealing’, says industry regulator – but report stops short of calling for inquiry

A shopper in Asda
Asda was found to have ‘proactively engaged with suppliers to rectify any lump sum arrangements’. Photograph: Neil Hall/Reuters

The company, named as the worst supermarket in its treatment of suppliers earlier this year, was found to have demanded up front payments worth up to a quarter of the value of annual sales of particular products in order for suppliers to retain their place on the shelf.  

Some of those who refused to make these payments, which were greater than those agreed in suppliers’ contracts, were given notice that they would be ousted within as little as four to eight weeks, according to the industry watchdog.

The demands, reported by the Guardian last year, were in breach of the grocery supply code of practice – government-backed regulations that can attract a fine of up to 1% of UK turnover.

In a “code clarification” document published this week, the Groceries Code Adjudicator (GCA), said it had not decided to launch a formal investigation into Asda’s behaviour or issue a fine.

However the regulator, which oversees a government-backed industry code of practice, said a review had found that the Walmart-owned chain had breached “the overarching principle of fair dealing” in the code with conversations “designed to carry an implication of detriment if any supplier declined to agree” to its demands.

The watchdog said there was no need to launch an investigation. Asda had “proactively engaged with suppliers to rectify any lump sum arrangements, which should not have been made” and put further safeguards in place to prevent any further breaches.

The GCA report added that the project renewal strategy had been designed by a consultancy commissioned by Asda to achieve cost savings, and it was clear that “the role of the third party consultants was closely bound up with the issues raised”, as they had been able to achieve bonuses based on the amount of money they were able to save Asda.

The supermarket said project renewal, launched in late 2015 under former chief executive Andy Clarke, had been Asda-led with support from Bain.

Asda’s current chief executive, Sean Clarke, said: “Our mission is to save customers money through low prices by always securing the lowest possible costs built on a foundation of strong, trusted partnerships with our suppliers and absolutely in line with the groceries supply code of practice (Gscop).

“The matter raised in the GCA’s case study occurred over a year ago and since then we have significantly strengthened our Gscop compliance programme. We have engaged openly and transparently with the GCA to support her enquiries in keeping with her collaborative approach.”

Bain said in a statement: “As per our company policy, we do not speak publicly about who may or may not be our client.”

Read the article here.