Product suppliers continue to negotiate mutual sanctions networks. Now they are proposing to include “pair fines” in the contracts, according to which both parties will be liable for similar violations. But the networks fear that the search for new grounds for sanctions will only exacerbate the contradictions between market participants.
With the proposal to supplement the supply agreements with “pair fines”, the Rusprodsoyuz association (which combines Makfu, Tsaritsyno, Beluga Group, etc.) turned to the commission on the application of the Code of Good Practices (KDP, on a voluntary basis regulates the relations of suppliers and networks). As the executive director of Rusprodsoyuz Dmitry Vostrikov notes, if we proceed from the meaning of the fine as an incentive to comply with obligations, then it must be bilateral and equal: then both counterparties will work on internal processes. “For example, the car arrived at the distribution center on time, but stood in line for a day. The delay in this case occurred due to the fault of the distribution network, but under a contract where there is no mutual liability, the supplier will pay the penalty for machine downtime and untimely shipment, ”says Mr. Vostrikov. Rusprodsoyuz considers it logical if the contract also provides for fines for the network for incomplete acceptance and late unloading of goods.
The commission on the application of the KDP considered that the issue of forming a list of “pair fines” as a recommended form for inclusion in contracts between networks and suppliers is not within its competence. But there they recognized the good practice of establishing mutual penalties in contracts for failure to perform or improper performance of obligations commensurate with the consequences of violations. Upon receipt of additional appeals from market participants and in the case of precedents of “pair fines”, the use of which can be recognized as good practice, the commission is ready to consider this issue additionally, the protocol of the meeting said.
The X5 Retail Group (Pyaterochka, Perekrestok, Karusel), Lente and Auchan said they had not yet received requests from suppliers to include “pair fines” in their contracts. The representative of X5 added that the Intersectoral Expert Council had already developed a new edition of one of the articles of the KDP, which stipulated the maximum amount of fines and secured the principle of mutual sanctions, as well as mandatory liability for breach of contract. The proposals have not yet been approved: they are fully supported by retail and part of the supplier unions, but the decision must be unanimous, added in X5. The Metro representative fears that discussions about finding some additional grounds for sanctions and fines will not give the market real constructive solutions, but only exacerbate the existing contradictions and distrust of the parties to each other. The Association of Retail Companies (ACORT) noted that the issue of “pair fines” requires a detailed discussion both within retail and between suppliers and distribution networks.
Part of the retail is ready to change contracts at the request of suppliers
The problem of penalties is one of the most acute in relations between participants in the retail market. Suppliers have repeatedly complained that fines have become less of a disciplinary mechanism for networks, but a way to generate additional value. The situation is aggravated by the split among the networks, the source said to Kommersant among the suppliers. If small and medium-sized chains agreed to describe controversial issues in additional agreements to contracts, then the largest players included in AKORT have not yet, he notes (see Kommersant dated December 26, 2019). But according to the executive director of Rusbrand (unites Procter & Gamble, PepsiCo, etc.) Alexei Popovichev, for small and medium-sized suppliers today it may not be more relevant to mirror the sanctions, but to limit the upper limit of the amount of fines. The desire of manufacturers to fine chains for any violations, although it looks fair, in today's conditions is hardly realizable in practice due to the greater market power of retail, he argues.
Source: Kommersant