UK grocery regulator launches investigation into Amazon’s payment practices

Amazon (NASDAQ:AMZN) is being investigated by the UK’s top grocery regulator for failing to pay its suppliers on time, a breach of the country’s Groceries Supply Code of Practice and one that could result in a penalty of up to 1% of the retailer’s UK turnover.

The Groceries Code Adjudicator (“GCA”) opened a probe into Amazon’s (NASDAQ:AMZN) conduct towards its suppliers after warning the company last year to take “swift and comprehensive action” to comply with GCA code.

“Based on evidence [from monitored actions] it was clear that an investigation into compliance with paragraph 5 of the Groceries Code specifically was required.”

Article 5 in the UK Groceries Supply Code of Practice requires a retailer to pay a supplier for groceries delivered” within a reasonable time after the date of the supplier’s invoice.

Amazon’s (NASDAQ:AMZN) UK grocery business is relatively small compared to other markets, with a 1.6% to 3% market share versus 29% for UK grocery giant Tesco. Although Amazon (AMZN) does not separate net sales for its UK grocery business, the decision by the Competition and Markets Authority for Amazon (AMZN) to comply with the UK Grocery Supply Code of Conduct suggests its grocery business exceeds $1B turnover annually.

Amazon (AMZN) shares fell at Friday’s open and trading in the red for a third consecutive day.