Amazon faces potential investigation as Prime Day nears

A watchdog has warned that it would “not hesitate” to launch a formal investigation into Amazon if concerns were raised that the US giant was not treating its suppliers fairly and lawfully.

The Groceries Code Adjudicator (GCA) has told Amazon to take “swift and comprehensive action” to improve its compliance with industry rules which are designed to protect suppliers.

The grocery regulator has encouraged suppliers to submit information confidentially about any issues they were facing with Amazon.

Ahead of Amazon’s annual Prime Day later this month, GCA said its 2024 survey found that fewer than half of respondents directly supplying Amazon believed the retail giant “consistently” or “mostly” complied with the Groceries Supply Code of Practice (GSCOP).

The code aims to ensure Britain’s 14 largest grocery retailers, including Tesco, Sainsbury’s and Marks & Spencer, treat suppliers fairly.

It restricts firms from making changes to supply contracts at short notice and also requires retailers to give an appropriate period of notice if they no longer want to use a supplier and provide reasons for ending the contract.

Amazon’s perceived code compliance score fell from 59 per cent last year to 47 per cent.

‘Many suppliers do not believe that Amazon is complying with the code’

The results of the 11th annual survey, which received more than 3,000 responses, show that the number of suppliers experiencing a code issue fell from 36 per cent to 33 per cent.

As food price inflation has fallen, the number of suppliers which requested at least one cost price increase (CPI) from a retailer over the previous 12 months fell from 91 per cent in 2023 to 67 per cent in 2024.

The number of suppliers highlighting a retailer’s response to a CPI as an issue almost halved, falling from 28 per cent in 2023 to just 16 per cent.

Groceries Code Adjudicator Mark White said: “I am encouraged to see improvements in retailers’ treatment of suppliers across a range of issues including the management of cost price increase requests but also resolution of invoice discrepancies and data input errors.

“However, the survey shows clearly that many suppliers do not believe that Amazon is complying with the code. Amazon must ensure suppliers understand the changes it has made since its designation and in response to these survey results, and make any further changes that are needed to ensure code compliance.

“I will not hesitate to launch a formal investigation if appropriate and necessary to ensure Amazon is treating its suppliers fairly and lawfully.

“I encourage suppliers to continue to confidentially tell me about the issues they are facing with Amazon.”

How have other retailers fared?

For the first time, Co-op came top of the 14 retailers for overall code compliance, at 98 per cent.

Co-op and Lidl both recorded a two per cent improvement, which was the biggest percentage improvement across the 14 retailers.

Co-op Food managing director Matt Hood said: “I am absolutely delighted to see Co-op at the top of the 2024 GCA annual survey, and again one of the most improved retailers, which is a huge testament to how far we’ve come and the sheer hard work of the team, as it is a significant improvement on even last year, where we were in fifth position.

“I am extremely proud of our teams, as we continue to drive innovation, creativity and excellence in supplier engagement whilst delivering ongoing improvements in our commercial performance.

“I’m also grateful to all the suppliers who completed the survey and shared their feedback.”

What has Amazon said?

An Amazon spokesman said: “We are very disappointed by these results and we are committed to improving them. Amazon takes the Groceries Code extremely seriously and we have introduced robust compliance procedures for our suppliers.

“We have made a series of improvements to our grocery supplier experience since last year’s results, with clearer explanations for cost price increase decisions, minimum periods for de-listing, and the launch of a major upgrade for handling invoice disputes.

“We will be making further changes, with faster time-frames to resolve more types of financial disputes, as well as strengthened account management support for smaller suppliers.

“There is still more to do. We are committed to working with the Groceries Code Adjudicator, building long-term sustainable relationships with our suppliers, and continuing to create opportunities for suppliers of all sizes to reach millions of customers in the UK and around the world.”