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New method to ban bully giant retailors
Last Updated(Beijing Time):2006-11-16 10:21
Supermarkets and chain store giants who used to default payment to goods suppliers or bullied them into forking out unnecessary charges have to be careful as a new method took effect on Wednesday.

This first-ever method to secure fair trade between retailers and suppliers will empower suppliers, especially small and medium-sized ones, to defend their legitimate interests and report offense to relevant authorities.

The instrument came after nine high-ranking managers from bankrupt supermarket chain Price Smart China were put on trial in October for allegedly stealing and defrauding a total of 120 million yuan from the corporation and individual stores and banks.

While a key chain warehouse of the Price Smart Membership Shop in Beijing was shut last January to evade suppliers demanding delayed payment, protests culminated after nearly 100 suppliers picketed the shop gates and a drove of shoppers asked for refunds on their membership cards.

The verdicts are yet to come. Assistant Minister of Commerce Huang Hai said the document was tailor-made against such bully retailer.

The method jointly issued by the Ministry of Commerce and other four departments covering pricing, taxation, public securities and industrial and commerce forbids retailers, either local or foreign-invested, to solicit kickbacks from suppliers or force them to pay for the wear and tear of goods on shelf.

It provides detailed rules on the charges retailers may impose and suppliers and prohibits retailers from demanding unreasonable withdraw of goods by suppliers.

Song Ze, researcher of the China Academy of Social Sciences, said that the contradiction between retailers and suppliers have existed for a long time.

"The deep-rooted cause is that foreign large retailers took lead to use their distribution and capital advantages to withhold their payment to suppliers, which hindered the latters' cash flow and eventually sour the relationship," said he.

A survey from the Ministry of Commerce revealed that payment default by retailers has actually evolved into an industrial practice. And domestic retailers do not stay clean. In some cases, payment of goods can be delayed five to six months behind the schedule.

In China, the world's largest market boasting of a population of 1.3 billion, a saying widely spread in the business circles is that who controls the distribution channels is the King.

There are quite a number of "Distribution Kings" in China, the U.S-based Walmart, France-based Carrefour, UK-based B&Q, Lotus Supermarkets from Thailand and local ones like Merrymart and Hualian.

A supplier said that it was right time to rectify their malpractice. Describing the method as "only a first move", he said that dethroning the Kings would be "difficult".

"If we reported offenses, who guaranteed the problematic retailers would be immediately punished and what are the other options to sell our products?" he asked.

Song Ze said the supplier's concern reflects the next move Chinese authorities must take-- to tighten supervision and strengthen enforcement.

As five different departments are involved, he suggested officials of trade, public securities, taxation, pricing and industry and commerce establish a regular coordination mechanism to share information and launch joint crackdown on major transgression.

"Suppliers are not the only victims of the unfair trade---People working for suppliers, banks extending loans and shoppers having to pay higher prices for the extra costs that cash-strained producers refused to pay." Song said.

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