James Thomson Editor

James Thomson is the editor of BRW. Previously he was editor and publisher of SmartCompany and a senior editor at Business Spectator. He writes regularly on Australia's wealthiest entrepreneurs and has deep expertise in small business and the mid market.

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What happens in Vegas: How the supermarket giants deal with suppliers

Published 15 February 2013 09:08, Updated 18 February 2013 07:20

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What happens in Vegas: How the supermarket giants deal with suppliers

Business gamble ... one supplier says that to knock back a $60,000 self-funded Vegas trip is to risk losing favour with the big supermarkets. Photo: Getty Images

A few years ago I was talking to a mate who supplied hardware products to the big grocery companies (which all have their own hardware retail chains too) about a work trip he’d just been on with one of those grocery heavyweights.

The trip was to a big hardware show in Las Vegas, but in reality the show was only a distraction. Dinners, nightclubs, gambling sessions, tourist attractions enjoyed in complete luxury. What a “work” trip!

“And all paid for by [grocery chain X] to reward their suppliers,” I said to him in amazement.

“Don’t be silly mate,” he snorted. ‘We had to pay them - $60,000 a person.”

My friend explained that the trips, held a few times each year, were essentially ways for the grocery group to make some a little extra money and “test” the loyalty of their suppliers.

Failure to attend would not reflect well on a supplier, who might find themselves getting less favourable treatment – that might mean anything from a crappy place in the next catalogue to a less space on the shelves.

Most suppliers paid up and tried to get some sweeteners for the $60,000, such as a front-page spot in the next big catalogue or television advertisement.

The story struck a chord with me after I read about some of the allegations that Australian Competition and Consumer chief Rod Sims has raised about misuse of market power by the big grocery groups.

Sims, who says 50 suppliers have come forward confidentially with claims the giants are misusing their market power, says examples includes threats to cut the amount of shelf space a supplier has, threats to remove products all together in favour of their home brands and refusal to pay suppliers what they’ve been promised.

But the one that grabbed me was this allegation: “Persistent demands for additional payments above and beyond those negotiated in their terms of trade.”

I wonder if the “work” trip that my friend count in this category? I’ve no idea, but I would assume such things aren’t covered in your standard terms of trade.

Sims may well have a hard time proving that the grocery giants have misused their market power (which is illegal) and not just used their market power (which is not illegal).

But the confidential claims he has received may allow the ACCC to properly examine what is an open sore in one of our most important industries.

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