Sobeys has joined an organization representing suppliers to call for regulation of how supermarkets deal with suppliers.
Federal, provincial and territorial ministers of agriculture have launched a study into the relationships after Walmart led a push by supermarkets to demand price reductions from suppliers.
Sobeys owner Empire Company Ltd. is agreeing with the Food, Health & Consumer Products of Canada organization in asking the federal government to create a code of conduct for the relationships between retailers and the product vendors who stock their shelves.
The proposal suggests a code similar to one in the United Kingdom, including a dispute resolution system to look into complaints about unfair practices. There, the Groceries Supply Code of Practice adjudicator has the power to fine retailers up to one per cent of annual U.K. revenues.
Empire and FHCP’s proposed code provides for monetary penalties determined by an adjudicator on a case-by-base basis.
In Ontario, farmers and supermarkets have had a long history of abuses that in 1977 led to a judicial inquiry that actually left matters worse because a body that could conduct inquiries was scrapped.
So far no other supermarkets have stepped up like Sobeys to call for regulation.
Last summer Walmart Canada told suppliers it would impose new fees to offset investments in store infrastructure and e-commerce.
The following week United Grocers Inc., a buying group for smaller retailers, sent letters to its suppliers saying it expected “any cost reduction” provided to competitors to also apply to the 6,500 retailers it represents, including Metro Inc. , Alimentation Couch-Tard Inc., Save-On-Foods and others. Then in October, Loblaw Companies Ltd. also told suppliers it would raise fees, and also cited the company’s planned investments in stores and e-commerce operations.
FHCP and Empire’s proposed code specifies that retailers should not arbitrarily change supply agreements, and that the agreements between retailers and suppliers should contain detailed rules that would be used to make any changes to the terms.
The proposal also suggests that retailers not be allowed to make unilateral deductions to payments without providing detailed reasons, and that a process be put in place for suppliers to challenge those fines.
The proposal sets out rules for other practices such as charging suppliers for product placement on shelves, the accuracy of retailers’ forecasts on order quantities, suppliers’ contributions to the retailers’ marketing costs and other issues.
“We all recognize that these fees recently imposed by some retailers are really worrying,” federal Agriculture and Agri-food Minister Marie-Claude Bibeau said during a news conference after a ministers’ meeting in November.
A working group the agriculture ministers established then is to report back to them in July.