A new round of dispute over bonuses between suppliers and retailers was initiated by a State Duma deputy from the United Russia faction Irshat Minkin. Before the parliamentary holidays, he managed to introduce a bill that would remove distributors from the norm limiting the amount of bonuses for retail chains. Manufacturers reacted extremely negatively to this initiative, considering it a “loophole” for retailers to receive additional premiums from counterparties.
The bill submitted to the State Duma by Deputy Irshat Minkin, which removes distributors from the norm that limits the amount of bonuses for retail chains under the Law “On Trade”, is posted on the website of the lower house of parliament. It indicates that the document has been accepted for consideration.
Amendments to the Law on Trade, adopted almost four years ago, limited the aggregate amount of bonuses collected by retailers from suppliers to 5% of the price of goods. The proceeds should be used for advertising, marketing, logistics and other services. In addition, the law reduced the terms of payment for goods to suppliers from 10–45 days to 8–30 days, depending on the duration of storage of products. These conditions, enshrined in the law, became a compromise in a multi-year dispute between suppliers and retailers. The former claimed that the refusal to pay premiums to chains led to a freeze on purchases. The second insisted that these payments are necessary, among other things, for the promotion of products.
The initiative of the deputy to change the existing balance did not like the producers. If the bill is adopted, distributors and logistics structures controlled by the networks may appear on the market, which will bypass the restrictions on bonuses, fears the head of the National Meat Association Sergei Yushin. “Now retailers are actively developing their own distribution channels, so such innovations can become a“ loophole ”for receiving additional bonuses from product manufacturers,” agrees Dmitry Leonov, deputy chairman of the board of the Rusprodsoyuz association.
Large retailers polled by Kommersant did not comment on the new bill. It was not possible to contact the deputy Irshat Minkin on Monday.
Mr. Yushin explains that now all issues of trade regulation are discussed by networks and suppliers within the framework of the Interindustry Expert Council (MES). “There is a conceptual agreement that suppliers and retailers do not initiate amendments to the Law on Trade without discussion with the MES members. This was done, among other things, to prevent the emergence of initiatives like this, ”the expert says. Now a balance has been found between producers and retail chains, all parties have adapted to the existing conditions, adds Mikhail Glushkov, director of the Fruit and Vegetable Union.
Sergei Yushin does not exclude that market participants who are not members of the MES pushed the bill to appear. If the bill is adopted, it will dismantle the self-regulation system created in the retail market, the expert said. “And all the agreements that retailers and their suppliers have reached under the Code of Good Practice will fall apart,” he adds.
Meanwhile, two years ago, the Ministry of Industry and Trade, in its report on the effectiveness of amendments to the Law “On Trade” that came into effect in July 2016, indicated that these changes had a negative impact on the profitability of 45% of retail chains and suppliers (see Kommersant dated April 23, 2019 ). At the same time, more than 80% of 1.5 thousand suppliers and representatives of retail chains surveyed by the Ministry of Industry and Trade, called the effectiveness of the amendments low. And for 45% of the respondents, the measures caused the increase in costs. Thus, a decrease in the total amount of payments led to a drop in profitability for 17.5% of networks and suppliers. However, then a number of product manufacturers told Kommersant that the ministry’s report was developed in the interests of retail and some distributors trying to prove the harm of state regulation.