Woolworths’ deduction demand would be breach of contract, says BHHMA

Woolworths is understood to be meeting suppliers over its intention to make financial deductions from their accounts. The meetings appear to have come about as a result of angry protestations from the British Hardware and Housewares Manufacturers’ Association to the retailer over lack of consultation.

Woolworths' deduction demand would be breach of contract, says BHHMA

Woolworths wrote to its suppliers in January asking for a one-off contribution, which the BHHMA says seems to amount to about 6% of 2006 sales, with the sums varying between £3,000 and £61,000 plus VAT. The retailer has also set a new payment term of 90 days and 5% settlement discount.

The letter said the moves were necessary because of “intense competition, increasing costs and price pressure from customers. To combat this, Woolworths continues to invest…not only in capital expenditure, for example with our new store formats, but also in product development, marketing, pricing and supply chain.”

However, in a January letter to Woolworths, BHHMA president David French wrote: “You are seeking to make this deduction without any clear and reasoned explanation as to why it is necessary and without any form of consultation with your suppliers. On behalf of my members I would like to protest in the strongest possible terms against your imposition of such a deduction. Clearly you should only apply the deduction where you have specific written agreement from a supplier to do so. Otherwise, it seems to me that the unilateral imposition of such a deduction is in breach of the contract that you have with each supplier.”

The BHHMA says it understands that Woolworths is now holding one-to-one meetings with suppliers to discuss its demands. The association continues to make representations to the Office of Fair Trading over such deductions.

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