Buyers at Britain’s fourth largest supermarket chain have attempted to secure one-off payments from around 20 suppliers in a possible breach of a code backed by the government. Only “a handful” of these efforts were blocked by the supermarket’s legal team.
The government-backed code forbids these sorts of demands and cites that supermarkets mustn’t “vary any supply agreement retrospectively”, unless in very select circumstances.
An internal email from Morrisons’ legal team, seen by The Guardian, also instructs buyers to take advice on how to continue demanding one-off payments from suppliers while still satisfying regulators.
Last week, the grocery watchdog said it had called for explanation from Morrisons after a letter sent to suppliers, revealed by The Guardian, asked for“a lump sum payment” in order to facilitate the grocer’s half year profits. The GCA said that at this stage it “has no evidence that Wm Morrison has breached the code.”
A spokesman for Morrisons said: “We do have agreements with some of our suppliers that enable us to occasionally ask for support to enable us to invest in our business to the mutual benefit of Morrisons and our suppliers.”
But the internal email, from a member of Morrisons’ legal team, says: “We have seen a number of requests for H1 [first-half] funding recently that don’t appear to be based upon any existing supplier obligation.”
It encourages buyers to contact them for advice on how to “construct arguments that are credible” so as to continue insisting on such payments that are in line with the code but could be frowned upon.
Retailers can be fined up to 1% of UK annual turnover if they are found breaching the code, which for Morrisons would equal circa £168m. Buyers were warned in the internal email written last month: “We are on the GCA’s radar.”
Last year the big four grocer was found to have breached the grocery code having overcharged 67 suppliers. It was forced to reimbursed the suppliers involved.