British supermarkets that fail to abide by the U.K.’s Groceries Code may face fines in the near future.
UK Business Secretary Vince Cable on Thursday tabled measures in Parliament which will give the Groceries Code Adjudicator powers to fine supermarkets that breach the code in their relationships with their suppliers.
Will you offer us a hand? Every gift, regardless of size, fuels our future.
Your critical contribution enables us to maintain our independence from shareholders or wealthy owners, allowing us to keep up reporting without bias. It means we can continue to make Jewish Business News available to everyone.
You can support us for as little as $1 via PayPal at firstname.lastname@example.org.
Under the plans, the adjudicator will be able to impose penalties on the UK’s biggest supermarkets, including listed supermarkets Tesco PLC, J Sainsbury PLC and Wm Morrison Supermarkets PLC, of up to 1% of their annual UK turnover.
The penalties depend on the seriousness of the breach of the code of conduct and the new measures will sit alongside existing powers to issue supermarkets with recommendations to improve their future conduct and to ‘name and shame’ companies that breach the code.
The code imposes on the supermarkets an over-arching principle of fair dealing with their direct suppliers and includes specific provisions governing terms of supply, timing of payments, marketing and promotional costs, and payments as a condition of being a supplier, according to the Department for Business, Innovation and Skills. The code does not govern issues relating to pricing, it added.
This important final step will give the Groceries Code Adjudicator the power it needs to address the most serious disputes between the large supermarkets and their direct suppliers, ” Cable said, according to the report.
The move comes after a report published earlier this month by insolvency specialist Begbies Traynor Group PLC found the escalating price war among big UK supermarkets and discounters has put many smaller food retailers and suppliers at risk of going under.
Small food retailers and suppliers have been the hardest-hit casualties of the ongoing price war among supermarkets in the UK, as Tesco, Sainsbury’s, Asda and Morrisons attempt to cope with the competition from discount retailers Aldi and Lidl. The supermarkets have been cutting prices and, as a result, have been squeezing suppliers’ margins and elongating payment terms.
Meanwhile, a report said Sainsbury’s topped the Financial Conduct Authority’s list of all short positions in UK listed companies that have been disclosed.
Sainsbury led the list with 10.6% of its shares out on loan.
The company has been dragged into the U.K. supermarket price war, and it is looks as if investors believe that the retailer won’t be able to hold its ground against the discounters, But unlike other companies, Sainsbury’s is not overvalued and there are few obvious reasons why short sellers would want to target the company.
Sainsbury’s currently trades at a forward P/E of 10.6, offers a yield of 4.7% and trades 20% below its net asset value, so for the time being there seems to be no obvious reason to avoid Sainsbury’s.