Financial and competition regulators in Australia have teamed up to look into the rising use of supplier payday lending schemes used by big companies, according to a report by The Australian.
The Australian Competition & Consumer Commission (ACCC) has partnered with the Australian Securities & Investment Commission (ASIC) over the schemes, which involve a supplier discounting an invoice to get a faster payment.
The ACCC wants to target what it calls unfair contract terms for consumers and strengthen protections for small and medium-sized businesses (SMBs) who feel they have to accept the use of supply chain schemes to help their businesses.
ACCC chairman Rod Sims said several companies were using the schemes to alter payment times.
“Some of these matters were resolved voluntarily by the large business in question changing its practices either of its own volition, or following contact from the ACCC,” Sims said.
Rio Tinto and Telstra, two large Australian companies, stopped using the schemes after it was revealed that they were using a company called Taulia to figure out how much they could get out of a supplier. Other companies, like construction outfit CIMIC, use what is called an “early payment” scheme.
Some investigations couldn’t be completed because some SMBs feared “commercial repercussions” from talking to the ACCC.
“However, we note that the ACCC now has the power to compel business to provide information and documents in relation to allegations of unfair contract terms,” Sims said.
The two organizations are also looking into misconduct allegations surrounding supplier payment times as well as the use of what is known as reverse factoring.
“Reverse factoring is also likely to involve the supply of a financial service which would mean some of the alleged conduct may fall for consideration under the Australian Securities and Investments Act rather than the Competition and Consumer Act,” he said. “The ACCC will liaise with ASIC in assessing any allegations of conduct around extended payment terms involving the offer of supply chain financing.”
The misuse of supply chain financing is a big deal in Australia, and last year in October the small business ombudsman warned that businesses would miss out on government contracts for participating in these schemes, according to a report by the Financial Review.
“The federal government has said they will exclude companies from government tenders if they are paying slowly and we are putting more pressure on the government to do exactly that,” Small Business Ombudsman Kate Carnell said.