Government to take stern action against supermarkets squeezing manufacturers
View(s):The Government is to take stern action against supermarkets and large retail traders for imposing excessive margins and other hidden charges on outside suppliers particularly SMEs, official sources revealed.
Supermarkets should provide equal treatment to all suppliers in their outlets and limit charges imposed by them without exceeding 25 per cent of the maximum retail price marked on such domestically supplied products, a senior Treasury official said.
According to the 2015 budget proposal, consumer protection laws will be amended to take stern action against modern large retail traders who have excessively expanded their in-house brand products along with excessive margins if they resort to unethical business practices squeezing suppliers and small and medium scale enterprises.
These retail businessmen should reduce prices of all essential goods by at least 10 per cent in view of the reduction in VAT by 1 per cent, electricity by 15 to 25 per cent and lending rates of banks by significant margins, the official emphasised.
Anti competitive practices are not permitted under the Consumer Affairs Act, and manufacturers have the right to make a complaint to the Director General of the Authority to conduct investigations and to direct it to the Consumer Affairs Council to make its determination, J.M.A. Douglas, DG Consumer Affairs Authority (CAA) told the Business Times.
He noted that local suppliers and SMEs are providing goods to supermarkets and large retail outlets under an agreement with terms and conditions and therefore the authority can only intervene, make an inquiry and take necessary action if there is any violation of the agreement.
Mr. Douglas said that the authority has so far not received any complaints from suppliers or SMEs with regard to high margins levied by supermarkets, but representatives of one of the leading supermarket chain had met him recently and brought to his notice that removing VAT on certain items from the budget and imposing special taxes had exerted an impact on their gross profit.
A Fast-Moving-Consumer-Goods (FMCG) manufacturer told the Business Times that one of the leading supermarket chains charge as high as 30 per cent to 50 per cent margin while giving 90 to 120 day’s credit on the trade price (or the manufacturer’s price) for keeping these items on their shelves.
He claimed that payment to manufacturers, by this supermarket chain is ranging from 90 days to 120 days but often extend even beyond, although they get their monies from consumers promptly upon a sale.
They are also directly demanding an additional margin in the range of 3 per cent to 5 per cent for various other costs, he disclosed.
He pointed out that in the case of products sold under their brand, supermarket-owned products are given display at ‘eye level’ as against poorer display levels for others. As for profit margins they subsidise their products to attract more consumers since they make profits both from their manufacture and from the margins kept for sale from their supermarkets, he said.