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Friday, 5 December 2014

Premier Foods

Premier Foods, the largest food manufacturer in this country has been revealed to be requiring its suppliers to pay for the privilege of remaining suppliers. This seems to me to be morally problematic.

The whole point of free markets is that they are free. Individuals and firms are free to make whatever deals they wish – provided no coercion or deception is involved. Trade is agreement: in exchange for x I am prepared give y. If you are prepared to accept y and to part with x, we have a deal. In 99% of all cases this not problematic. But if I pay you to inflict undeserved violence on a third party, we have a problem.

Superficially, at least, the details of the deal concern no one but the participants – provided no third party is harmed. No one will be harmed if John pays Interflora to deliver roses to Mary. Mary’s husband may not be best pleased; but that is not Interflora’s fault, even if John is a home wrecker.

In a more complicated situation, where Premier Foods demands not only acceptable price, quality and delivery/credit terms in exchange when it agrees to pay for corn starch (or whatever), but an additional sweetener, the waters are muddied. But is anyone cheated or coerced? Other (unsuccessful) suppliers may be grumpy about the situation – just as they may be grumpy about the successful supplier’s ability to offer appealing credit terms. It’s not clear that any principle has been violated.

What about the very common case of a salesman using his expense account to wine and dine representatives of the company with which he is wishing to do business? My instinct is that this is OK, within limits. What limits? If (instead of champagne and caviar) the inducements are luxury holidays, have we gone beyond the limits? The inducements are (ultimately) paid for by the customer. My instinct is not a moral principle.

In the case of an aircraft manufacturer paying millions to a government employee to secure a government contract, the consensus seems to be that this is well beyond the limits – the manufacturer and the government employee are in fact defrauding the customer. The customer pays (maybe) billions but gets (maybe) an inferior product. In most democracies an offence has been committed – corruption.

I am no closer to making my mind up on the principle than when I began. I’m not sure if, in the case of Premier Foods, any principle has been violated. However, it does seem to me that transparency is desirable. If the supplier has to pay for the privilege of supplying, he has fewer resources to devote to improving quality and lowering prices – the genius of capitalism.

In ordinary transactions money goes one way, goods and services go the other.

Subjectively, I am against this way of doing business. But I’m still not sure about the principle. What think you?

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