Tesco's Thai practices called into question

Tesco, the leading UK supermarket group, is the vanguard of British retail expansion, but the methods it employs to develop its international business have been called into question, at least in Thailand. Carrefour, Casino and Siam Makro have also come under fire for similar practices.

The Bangkok authorities have accused the companies of 'ripping off' Thai suppliers when negotiating the terms under which they will stock their goods - accusations which have already been levelled at Tesco and other UK retailers in the domestic market.

The Thai government is currently seeking confirmation of its claims against the four store chains, and if this is forthcoming it will begin legal proceedings against the companies which could result in steep fines and even jail.

The hard bargaining of European and US retail chains have long been a cause for concern among suppliers but are routinely overlooked by authorities. The Thai government is clearly not prepared to go down the same route as its counterparts in the west, however, and is said to be considering a raft of new restrictions on retail growth in Thailand, including a ban on listing fees - the money supermarkets charge suppliers to list their products - and the requirement that new store developments obtain government approval.

Thai consumers have welcomed the arrival of food retail giants such as Tesco and Carrefour, which have focused on Asia as the main driver of their international business. But the arrival of huge companies with an immense global buying power has obviously had adverse effects on local shop keepers, who have been forced to cut prices, and suppliers, who now find themselves obliged not only to charge less for their products but also, on occasion, to pay the retailers for the privilege of stocking them.

Not surprisingly, the retailers tend to look on these negotiations as part of the 'partnership' between supplier and retailer, and argue that the fees charged are not for stocking products but for the use of their distribution network and marketing skills. However, the Trade Competition Law in Thailand makes it illegal for retailers to pass marketing costs onto supplier and to charge listing fees of any sort.

Newin Chidchob, the deputy commerce minister who chaired the sub-committee investigating the retailers' practices, said that it was clear that the four companies had broken the law, but that the findings had to be sent to the Trade Competition Committee next month for confirmation. Once that was forthcoming, the sub-committee would set out new standards stipulating precisely what retailers can and cannot do.