Morrisons has been forced to repay cash and discipline staff after it was found to have breached the grocery market code of conduct for a second time by demanding lump sums of about £2m from suppliers, reports The Guardian.
The grocery market watchdog said Morrisons admitted to making 19 requests which were above and beyond agreed deals with suppliers in contravention of an industry code in place since 2009.
The contraventions came to light after a number of suppliers contacted Grocery Code Adjudicator (GCA) Christine Tacon after the Guardian revealed details of the demands for one-off payments in July last year.
The Guardian also revealed a letter from Morrisons’ legal team advising buyers to contact them for advice on how to “construct arguments that are credible” in order to continue to demand such payments – meeting the letter of the code but, it could be argued, not the spirit.
The GCA said she had received evidence from suppliers that senior Morrisons personnel were present at a meeting where lump sums of as much as £2m were requested from suppliers.
Some requests for cash had been accompanied by “clear indications that suppliers would suffer detriment, perhaps de-listing, if payments were not made”. These had “gone away when it hit the press”, a report listed on the GCA’s website notes.
Morrisons could have faced a full investigation and potentially a fine worth up to 1% of turnover, or more than £100m, but Tacon said there was no need to conduct an investigation because the supermarket had taken “swift action” to rectify the matter.
The chief executive, David Potts, ordered an internal investigation in which 66,000 emails were examined and employees interviewed, with disciplinary action taken when appropriate, including the departure of some staff.
The GCA said she had been “assured that additional training, more robust internal processes and increased audits are now in place and that Wm Morrison checked to see that no similar activity occurred at its year end in February 2016”.
Instead the GCA published details of the matter as a case study to clarify that such retrospective lump sum payments not explicitly agreed in supplier contracts were in breach of the code.
Morrisons had also contacted suppliers who had paid money for “no clear benefit” and offered them the money back which “in some cases was accepted”. It is understood that very few suppliers took up the payments.
“The GCA acknowledged that Wm Morrison had responded immediately when alerted to the issue, had conducted extensive internal investigation and this had led to the requests [for payments] not being followed up,” according to the published case study published.
Potts said: “These events happened a year ago and since then much has been achieved to ensure they don’t happen again. However, we are sorry they happened in the first place.
“Since then, we have completely changed the way we work with suppliers. I have brought in a new management team who have modernised and simplified all of our buying practices. We have also reorganised and retrained our buying team.”
It is the second time Morrisons has been found to have breached the code and had its poor practice highlighted by the GCA. In 2014, the supermarket was found to have breached the grocery code by overcharging 67 suppliers. In that instance the adjudicator publicised the case as a “case study” and Morrisons reimbursed the suppliers involved.
In a survey of suppliers published by the GCA a year ago, 30 per cent of Morrisons suppliers thought the supermarket rarely complied with the grocery code and a further 2 per cent thought it never did – making it the second worst performer of the big four supermarkets behind Tesco.
The latest issue with the industry watchdog comes as Morrisons faces a potential liability of up to £20m as My Local, the group that bought the Bradford-based group’s convenience store chain, looks at options for the business, including administration.
More than 2,000 jobs are at risk as My Local, which operates 120 stores, has brought in accountancy firm KPMG.
My Local, led by the retail veteran and Secret Millionaire star Mike Green, bought 140 Morrisons M Local convenience stores for £25m last September. The deal was backed by Greybull Capital, which along with OpCapita was one of the co-investors in the electrical retailer Comet, which collapsed in 2012.