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Tesco might be the tip of the iceberg

Scotland's only voice on the European Parliament's Agriculture Committee Alyn Smith has today called for a wide ranging inquiry into supermarket buying practices, especially into the ethics and effects of "supplier contributions".

The call comes as the Serious Fraud Office has launched an investigation into alleged wrongdoing at supermarket giant Tesco, amid allegations that some Tesco buyers may have inflated their supplier contributions in order to overstate profits, thereby increasing their own bonuses.
Alyn has responded to concern that the ongoing supermarket price war has resulted in increasing supplier contributions, putting real pressure on farmers and the supply chain. He has lodged Parliamentary Questions to the European Commission questioning the legality of the practice and written to the UK Competition Commission urging an inquiry. 
He has also highlighted comments by Duncan Swift, who leads the Food Advisory Group at respected audit firm Moore Stephens that:
“What shareholders and customers of the top 10 supermarkets do not realise is the extent of the buyer bonus culture that underpins demands for suppliers to pay commercial income.

“This bonus culture is comparable to the bank bonus culture, with supermarket buyers, operating in trading rooms similar to those operated by the banks and investment companies.

“As with the banks, someone must ultimately pay for these bonuses and although on the face of it the supplier seems to be footing the bill, we must ask how much of this cost the consumer pays for at the checkout."

Alyn said:

"I'm hearing more and more reports that the pressure on farmers is increasing and I'm concerned that the self interest of a few bonus focussed buyers may well be putting the food supply chain at risk. We have also seen that the accounting rules over "supplier contributions" seem somewhat open to abuse.

"A supplier contribution in itself strikes me as inherently unfair when the bargaining power of the two parties is so immensely unbalanced. I will be curious to see whether the European Commission shares my scepticism. At the very least we need to see these considerable items in supermarket balance sheets properly declared.
"I believe the Competition Commission should mount a widescale review of the practice to see just how widespread it is and what effect it is having. I have pointedly not contacted the Groceries Code Adjudicator as it is quite clearly a toothless waste of time and space.
"Some supermarkets, obviously, are better than others, and they have to be part of the solution. But they are commercial firms that exist to make money for their shareholders, and as the debacle at Tesco proves they could do with a bit more transparency in how they do business.
"The comments from Moore Stephens in particular are concerning. If buyer bonuses are influencing the behaviour of supermarkets then there is a real problem."