Hernando Ramírez-Santos | November 11, 2024
Anapol Weiss has filed a class action lawsuit against United Natural Foods, Inc. (UNFI), representing natural food suppliers allegedly harmed by UNFI’s invoicing practices. The lawsuit, initiated on behalf of NYSM Organics LLC and similar suppliers, accuses UNFI of applying unfair deductions and fees, which reduce supplier payments and breach contract terms.
As one of the largest U.S. distributors of natural and organic foods, UNFI operates over 50 distribution centers nationwide, serving more than 30,000 customers and earning about $31 billion annually. Through this vast network and strong partnerships with retailers like Whole Foods Market, the company significantly influences small suppliers who depend on it for market access.
The complaint claims UNFI unlawfully deducts “prompt payment” discounts, even on delayed payments, citing negative balances due to its billing practices. According to the lawsuit, this behavior financially strains small food brands, which rely on transparent dealings to stay competitive in the natural foods sector.
In response to the lawsuit, a UNFI spokesperson stated in an email, “We value our supplier relationships and are reviewing the details of the complaint. We will proceed with the legal process as appropriate.”
Key Allegations in the Lawsuit Against UNFI
Excessive Deductions and Unfair Fees
The lawsuit alleges that UNFI systematically reduces the amount it pays suppliers by applying various fees and deductions to their invoices. Suppliers contend that these deductions are not transparent or adequately explained, leaving them with significantly reduced payments.
These reductions can lead to severe financial strain for small or emerging natural food brands, which often operate on slim profit margins. This can impact their ability to reinvest in their businesses or maintain operations.
Improper “Prompt Payment” Discounts
Another major issue the complaint cites is UNFI’s alleged practice of taking “prompt payment” discounts even when payments are delayed. Typically, a “prompt payment” discount is offered as an incentive for early payment. However, the lawsuit claims that UNFI deducts these discounts regardless of whether it meets the early payment terms, effectively penalizing suppliers without justification.
Negative Account Balances Justified by UNFI’s Practices
According to the complaint, UNFI frequently justifies delayed payments or deductions by citing “negative account balances” that, suppliers argue, are created by UNFI’s billing policies. The lawsuit claims these policies result in an artificial, ongoing debt that the company then uses as a rationale for reduced or delayed payments. Suppliers argue this tactic is a means to withhold full payments without cause.
Impact on Small Suppliers and the Broader Market
The class action lawsuit argues that these practices are part of a larger pattern in which the company uses its powerful market position to exert control over smaller suppliers. Small food brands rely heavily on distributors like UNFI to reach retail customers, and the lawsuit suggests that UNFI’s practices place these companies at an unfair disadvantage.
The suit claims that UNFI allegedly manipulates payments to hamper these suppliers’ ability to remain viable and competitive in an industry where they already face challenges against larger, established brands.
The class action seeks relief for all suppliers impacted by UNFI’s alleged practices and aims to stop what it describes as manipulative payment terms. Anapol Weiss, alongside co-counsels Aaron Katz Law LLC and Wagstaff & Cartmell, LLP, seeks compensation for affected suppliers and an end to these alleged breaches of contract.
This legal action also reflects broader concerns about the balance of power in supplier-distributor relationships, primarily when small businesses depend heavily on a major distributor like UNFI to sustain their access to markets and growth.
Hernando Ramírez-Santos; link to story: HERE