China is drafting new rules to minimize disputes over fees and commissions between suppliers and retailers after global retailer Carrefour was accused of charging higher slotting allowances.
A series of disputes between suppliers and retailers attracted high-level attention in January after Carrefour and Wal-Mart reportedly raised slotting allowances and other fees that outraged many products suppliers.
Yao Jian, a spokesman of the Ministry of Commerce, said such excessive charges also increased prices that consumers have to pay for the products. The ministry is teaming up with industry associations to further regulate retail businesses and will set up a coordination mechanism to deal with complaints.
A slotting allowance is a one-time payment by a manufacturer or vendor to a retailer in order to ensure shelf space in the retailer's store or in its warehouse. Slotting allowances are controversial and play a major role in new product introductions, and are becoming a new profit source for chain operators amid intense market competition.
But having to pay excessive allowances squeezes profits of suppliers, especially when prices of raw materials surged and drive small companies away from big supermarkets.
Last December, instant noodle maker Tingyi Holding Group halted the deliveries of its popular Master Kong noodles to Carrefour as they disagreed on a price rise. Tingyi also said it couldn't accept the commission that Carrefour demanded.
Carrefour's talks with China National Cereals, Oils and Foodstuffs Corporation for an edible oil contract, including the higher fees, also stalled.
