Australia's small business and family enterprise ombudsman has accused major FMCG brands including Fonterra, Kellogg and Mars of extortion-like behaviour.
The claims have emerged out of Kate Carnell's inquiry into payment times, in which she has identified a pattern that sees global companies pushing out payments to small businesses and then offering those same businesses loans to keep them afloat, according to a Fairfax Media report.
Carnell says the worst offenders are multinationals headquartered out of the United States in the fast-moving consumer goods (FMCG) industry, with companies including Mars, Kellogg's and Fonterra all offering loan arrangements to small businesses.
"It's pretty close to extortion really," Carnell reportedly said. "Large multinational businesses' payment terms have blown out considerably. They are now moving to have standard contractual payment times of up to 120 days. It's really bad for midsize businesses and a shocker for the SME space. It will kill SMEs.
"What's being put by these companies is, 'in your contract is 120 days, but we have an arrangement with the bank where you can get a loan and we can organise that at a few percentage points lower than the market and we are using our size to deliver that so aren't we good?'"
In an ABC 702 interview today, Carnell said increasingly, multinational companies are writing in their contracts that their payment terms are 120 days.
“They’re global, they’re billion dollar companies, they’ve just found that it is a cheap way to get capital that they can then use globally for hedging purposes all sorts of things and it’s fundamentally an interest free loan from Australian small to medium businesses.
“That’s not acceptable and it gets in the way of a growing economy. You can’t grow your businesses if people aren’t paying you and you don’t have the money to invest or to employ so this affects all of us.”
