PROPOSALS TO ban secret multi-million-euro payments within the grocery sector are to be published today by Minister for Enterprise, Trade and Employment Mary Coughlan.
A draft code of practice for the grocery sector, which has been seen by The Irish Times, also proposes the appointment of an ombudsman to arbitrate disputes between suppliers and retailers, and investigate complaints by consumer organisations.
The code would prohibit a wide variety of payments currently demanded by big retailers in return for listing or promoting products in their stores. The payments, which have grown massively in recent years and amount to hundreds of millions of euro, have been blamed for inflating the cost of groceries for the consumer.
The code would prohibit retailers from directly or indirectly requiring a supplier to make any payment or grant any allowance for the advertising or display of goods. Retailers would not be allowed to demand payments from suppliers in return for listing a product except for short-term promotions or where the payments reflected the risk involved in listing a new product.
Other payments, for example to cover a retailer’s marketing costs or to compensate for losses from theft or wastage, would be allowed but only where specifically provided for in a written agreement. This agreement would be subject to inspection by the supermarket ombudsman during an investigation.
A 2005 report by the Government-appointed Consumer Strategy Group found retailers were benefiting from discounts of up to 18 per cent – equivalent to hundreds of millions of euro across the sector – under undisclosed long-term arrangements with suppliers.
Ms Coughlan is proposing the post of ombudsman be funded by the sector because of the current tight Government finances and the move to rationalise State bodies rather than create new ones.
She has drawn up the code in response to widespread complaints by both retailers and suppliers about practices in the grocery sector.
Suppliers, including farmers, have claimed they are being squeezed by the demands put on them by powerful retailers, while the retailers contend the cost of sourcing goods in the Republic is much higher than elsewhere.
The code is to be finalised after a public consultation process to which interested parties have been invited to make submissions by the end of September. It would apply only to companies above a certain level of turnover, the exact level to be determined after the consultation period.
The question of whether the code would be voluntary or statutory has also been left open for now. The consultation paper says the feasibility of a voluntary code depends on the willingness of companies to subscribe.
Fine Gael accused the supermarket chains of putting up to 100,000 Irish jobs at risk by forcing suppliers to pay €160 million a year in “hello money”.
Publishing a Private Members Bill to ban “hello money”, agriculture spokesman Michael Creed said “cloak-and-dagger” practices by the retailers were threatening the future of the agri-food industry.
Responding, Ms Coughlan said “hello money” was already illegal under the Competition Act and the Fine Gael Bill would not add to the situation.
