Marks sparks supplier row as it puts a hand in firms' pockets

Manufacturers have blasted moves by Marks & Spencer (M&S) to cut payments to suppliers as "completely scandalous" at a time when costs are spiralling due to soaring energy prices.

Under new terms detailed in a letter sent to food suppliers, M&S said it would deduct a non-negotiable "marketing allowance" of 0.5% from all invoices from April 1, which means that for every £100 a supplier bills the company it will receive £99.50.

It said that for companies that are seeing strong sales growth, retrospective rebates will also be charged, so that the growth is "shared" with M&S.

Producers have branded the move a disgrace. One chilled food manufacturer said: "They shouldn't be allowed to get away with it. You can't just introduce new trading terms without a negotiation. It's scandalous."

Another M&S supplier added: "I love the way they talk about all the investment they have made in their business and their marketing as if this is something above and beyond the call of duty and that it's only fair that someone else makes a contribution.

"We invest in our businesses and we don't expect them to pay for it." He said the Supermarket Code of Practice -- to which M&S is not a signatory -- says multiples should not make "unreasonable" requests for suppliers to pay for marketing expenses. "But guess who defines reasonable?"

M&S said marketing allowances were "standard practice" in the food industry. "We are not changing our payment terms which, at 14-21 days, are the best in the industry," it added.

The M&S move came as retailer/supplier relationships came under scrutiny once again from the Office of Fair Trading (OFT). The viability of wholesale distribution networks could be threatened by the big four's market power, which also allowed them to buy at lower prices than other retailers, forcing suppliers to charge higher prices to smaller customers, said the OFT.

According to legal experts, another referral to the Competition Commission (CC) could result in tough action, including forced publication of standard terms of agreement with suppliers to prevent supermarkets pricing below cost, and even a national price list.

Simon Taylor, a partner in legal firm Wragge's anti-trust team, said: "This could lead to more legally enforceable measures, although the CC won't be able to cut the big four down to size."