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Suppliers demand change in law over retrospective discounts

Suppliers are calling for retrospective discounts to be outlawed by the government to prevent “bullying” by big multiples and department stores.

It comes after Arcadia introduced an additional 2% discount on all orders with a payment due after August 31 across its fascias.

One Arcadia supplier said: “The government should put something in place to prevent this from happening again. My worry now is that other retailers will look at Arcadia and think, ‘if they can do it, why can’t I?’”

Another supplier said: “We need to be protected. It is so easy for a big retailer to stop working with you if you don’t do what they say. This bullying must not be allowed.”

One brand owner agreed: “I’m afraid this is now common practice among the multiples; it’s not just Arcadia. The government needs to legislate against it. This is the only way it will be stopped.”

The head of UK for one menswear brand said: “Can you imagine if the Inland Revenue demanded a back-dated tax? The supplier is unable to back out; it is a coward’s way of obtaining discount.”

He added: “Business is extremely tough and with the [weak] euro it will become tougher. Only the strong will survive. The result will be an increase in non-ethical sourcing and quality will diminish.”

Stephen Sidkin, chair of the fashion law group at law firm Fox Williams, said the Groceries Supply Code of Practice could be adapted to protect non-food suppliers.

“An extension of the code to retailers above a certain turnover would not only offer some protection to suppliers, but could also provide a fillip to many small retailers.” 

The Department for Business, Innovation & Skills is consulting on plans to appoint a small business commissioner to lead a “culture change” in how disputes with larger companies over issues such as retrospective discounts and late payments are resolved.  

A BIS spokesman said: “Small businesses are more vulnerable to unfair practices, which can stop them growing and creating jobs for people. That is why the government is proposing to establish a small business commissioner to handle complaints made by small businesses against larger companies in relation to payment issues.

“We are currently seeking views on these plans and the experiences small businesses have had with practices such as retrospective discounting.”

Ian Cass, managing director of the Forum of Private Business, said: “Suppliers see the benefit in helping their customers to succeed in a competitive advantage by supporting them in the marketing efforts, but this should be done by with both parties’ agreement, not in this way [through retrospective discounting]. 

“Action like this reverberates through the supply chain, costing UK jobs and [undermining] the ability of good firms to invest in their own growth.”

Arcadia declined to comment.

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Readers' comments (3)

  • It will never happen. The government have too many high profile "big company " friends it would upset.

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  • I can't think of another word to describe this as theft.

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  • A small business commissioner would be a welcome first step. but it deoends on the powers which are granted. By way of comparison the Groceries Code Adjudicator has still to take substanial action. Meanwhile legislation such as that concerned with interest on late payment of debts is barely observed by industry.
    Stephen Sidkin
    Chair
    Fashion Law Group
    Fox Williams LLP

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