Retail buyers' bonus systems are open to abuse

It is "relatively easy" to cover up dodgy dealings between 'rogue' supermarket buyers and suppliers because of the lack of transparency in trading terms, industry insiders have claimed.

Their comments came as a Sainsbury buyer and a director at potato supplier Greenvale were arrested over allegations that Greenvale had paid bribes to secure business with the retailer.

With few written contracts and a poorly policed code of practice governing trading relationships, it was easier to hide fraudulent activity without arousing suspicion, claimed Duncan Swift, head of Grant Thornton's UK food and agribusiness recovery group.

He said: "I'm not saying it's common, but I've encountered it before, especially in commodities, where cynics could argue that your only USP is how much extra money you can put on the table."

He added: "Frauds involving collusion are always difficult to spot as the supplier's records verify the position of the supermarket's records and vice versa."

In some cases, supermarkets, rather than suppliers, unwittingly lined the pockets of their own buyers owing to the way bonuses were calculated, he said.

Buyers could abuse the system by paying inflated prices for goods, and in turn receiving inflated rebates from suppliers, he said. "The rebate is given before the retailer pays the inflated price; easier to do with payment terms now running into 60-90-plus days. At the trading level the supermarket is no worse off as the inflated price is reduced to a normal price before payment is made.

The allegations about Greenvale did not surprise rivals. One fresh produce md said: "There have been rumours about why certain companies have won business. Things aren't nailed down on paper, so we lay ourselves open to this kind of thing."