In February 2017, the Groceries Code Adjudicator ("GCA")1 clarified that retailers who directly or indirectly require or request payments from suppliers in return for shelf volume and product positioning commitments may be in breach of the Groceries Supply Code of Practice (the "Code").
The Code, which is comprised of a list of rules intended to prevent anti-competitive practices in grocery supply chains, applies to all major UK supermarkets including Aldi Stores Limited, Asda Stores Limited, Co-operative Group Limited, Iceland Foods Limited, Lidl UK GmbH, Marks & Spencer plc, Wm Morrison Supermarkets plc, J Sainsbury plc, Tesco plc, and Waitrose Limited.
The GCA's announcement comes in response to the public consultation on payments for better positioning which ran from June through to September 2016 and which enabled the GCA to investigate "how widespread these practices are…what forms they take, their impact on suppliers and their effect on competition and consumer choice." In particular, the GCA was concerned with practices which have potential to breach the Code, which clearly states that "a retailer must at all times deal with its suppliers fairly and lawfully…" (paragraph 2) and "…must not directly or indirectly require a supplier to make any payment in order to secure better positioning or an increase in the allocation of shelf space for any grocery products of that supplier within a store unless such payment is made in relation to a promotion" (paragraph 12).
The GCA has now confirmed the proper scope of paragraph 12 of the Code. In summary and in practice: "any retailer demand for payment to be made other than in accordance with the supply agreement that results in a supplier negotiating better positioning in return is not part of the normal commercial negotiations and might amount to an indirect requirement contrary to paragraph 12 of the Code".
Whilst the GCA opined that the consultation did not reveal sufficient information to merit interpretative guidance or other regulatory intervention at this stage, its statement comes as a warning to UK supermarkets. The GCA maintains the authority to conduct investigations into suspected breaches and to enforce the Code by making recommendations, requiring contraveners to publish details of any breach, and/or imposing fines.