An investigation by BBC’s Newsnight has reported that Premier Foods, one of the biggest manufacturers in the UK has been asking its suppliers for payments to continue doing business with the firm.
It said one supplier said the practice, known as ‘pay and stay’ was like ‘blackmail’.
Newsnight said it understands that Premier Foods has received millions of pounds from its suppliers in the UK in this way. However, it also reported that Premier Foods said it was confident the scheme did not break any rules under competition law.
Premier Foods in the UK owns brands including Mr Kipling, Ambrosia, Bisto and Oxo.
Quoting a letter from Premier Foods Chief Executive Gavin Darby, it said that the company is looking to reduce its number of suppliers ‘that can better support and invest in our growth ideas’. It goes on to then ask suppliers to invest in the company. Newsnight reports that one supplier had been asked for £70,000.
It also reports that Premier Foods has reduced its number of suppliers dramatically in the last 12 months.
Earlier this year, the IFA called for regulations to be introduced to address unfair trading practices and prohibit ‘hello money’, ‘pay to play’ money, Long Term Agreements (LTAs) which provide for the payment by suppliers of substantial ‘off-invoice rebates’ and also to prohibit contracts that compel suppliers to incur costs using third party suppliers specified by the purchaser.