MPs considering investigation of supermarkets' dealings with suppliers in wake of Tesco crisis

Suppliers have declared that Tesco is one of the most aggressive of the big supermarkets after profit scandal broke earlier this week

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The Independent Online

MPs are considering launching a new investigation into claims of the aggressive behaviour of supermarkets towards their suppliers in the wake of the Tesco scandal, The Independent has learned.

The powerful House of Commons business select committee, famed for its grillings earlier this year of the bankers behind the Royal Mail flotation, is mulling whether to haul in supermarket bosses over the demands for bonuses and discounts they make of the companies whose goods they sell.

The over-estimate of Tesco’s half-year profits is thought to be due to the way it accounted for such extra revenues from suppliers.

Since the scandal erupted on Monday, suppliers have declared that Tesco is one of the most aggressive of the big supermarkets in demanding they give it money back for stock that it fails to sell, or demanding rebates when it lowers the price of their goods.

The industry has come in for criticism by watchdogs recently for springing demands for lump sum payments on suppliers, creating havoc for their cashflow.

 

Today, the chairman of the business select committee Adrian Bailey, MP, told the The Independent he was watching the Tesco situation “very closely”.

He said: “Britain is a world leader in retail and if there are issues around the supply chain that are not working we will have to consider it.”

The last time the situation was reviewed thoroughly was with the Competition Commission inquiry five years ago. That recommended the industry set up an independent ombudsman, which it refused to do, forcing the government to draft legislation last year to create an adjudicator.

The review was lobbied heavily by Tesco, and some suppliers claim the new watchdog is a much-watered down version of what the Commission had intended, despite being backed by law.

Mr Bailey said: “It may well be that we have to take another look at the 2008 review in the light of the current inquiries into Tesco.”

Any investigation by the MPs may run into the same difficulties that the Competition Commission had – that suppliers were so worried about losing contracts with the Big Four supermarkets that they do not dare come forward with their grievances.

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