Tesco under fire over ‘pay to play’ money

Tesco price cuts puts added pressure on suppliers
Tesco price cuts puts added pressure on suppliers

Tesco has been asking for up to €500,000 per supplier to gain shelf space in its 119 stores across the country, according to The Irish Times.

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12 March 2010 | 0

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The Irish Times reported that Tesco has been demanding millions of euro from Irish suppliers over the past few months in order to continue stocking their products on the supermarket’s shelves.

According to the paper the chain was asking for up to half a million euro per supplier in order to gain shelf space in its 119 stores around the country.

There have also been complaints about other large retailers making similar demands on suppliers but those made by Tesco are much higher. Three suppliers have told The Irish Times they were asked to pay substantial six-figure sums to have their products relisted on Tesco’s shelves, or to keep them there.

Asked about the payments, Tesco said that “normal negotiations are under way with a range of suppliers”.

Requesting “pay to play” money is not illegal but it increases the overall cost of the goods for consumers. Although suppliers admit they feel bullied by Tesco they will not speak on the record for fear of being delisted.

Jim Power, an economist who chairs the Love Irish Food campaign, called on the Competition Authority to investigate.
He said he was aware of the pressure suppliers were being put under. “This cannot be allowed to happen because it will destroy an important strand of the fabric of Irish society. Irish suppliers cannot be pushed out of the market as part of the Tescoisation of society. There’s a difference between what’s not illegal and what’s not in the best interests of our society.”

A survey undertaken by Shelflife in November revealed that 95% of retailers felt under increased pressure to agree to less favourable conditions from larger retailers. It also revealed that 50% of suppliers had been threatened with delisting of products and that Dunnes Stores had applied the most pressure to reduce prices and/or alter terms of their conditions.

Last year, Tesco made profits of about €250 million in the Irish market, which is one of the most profitable parts of its worldwide retail empire.

 

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