Watchdog shock for Sainsbury

THE Office of Fair Trading flexed its muscles after Sainsbury's suppliers complained about their new payment terms. Much to the supermarkets giant's consternation, the watchdog issued a surprise statement highlighting the dispute and urging the chain to appoint independent mediators if the situation cannot be resolved.

The OFT appeared to be issuing a veiled warning against riding roughshod over suppliers in the quest to improve profits.

This is the latest in a series of headaches for Sainsbury's chief executive Justin King. Its attempts to cut costs have incurred the wrath of its staff and unions as well as food suppliers.

The OFT decided to intervene after being approached by the National Farmers Union and the Fresh Produce Consortium. They were angry after Sainsbury told nearly 2,000 suppliers that they would not be paid until between 30 and 60 days after an invoice is received. Previously, some were paid within 14 days.

An OFT spokesman said: 'We have spoken to Sainsbury about it. We would encourage supermarkets to use the mediation process in situations like this.'

The changes were due to come in on 7 March but Sainsbury has agreed to defer any moves until it has completed talks with suppliers. The NFU said: 'We are glad that raising the matter with the OFT has prompted Sainsbury to reconsider their terms.'

But Sainsbury said: 'We are not sure why the OFT issued the statement. We believe our procedures are completely consistent with the supplier code.'

The timing of the OFT's intervention is intriguing as it is finalising a report into whether the supermarket Code of Practice for suppliers is working.

Do you have a view on the power of UK supermarkets? Tell us by emailing editor@thisismoney.co.uk or have your say on our Spending message board.

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