Iceland faces the scrutiny of the Competition Commission inquiry after disgruntled suppliers reported the retailer for making radical changes to its terms and conditions without negotiation.

Last week we revealed Iceland's holding company Icebox Holdings had written to suppliers telling them it would extend payment terms to 90 days and introduce a settlement discount of 2.75% on all invoices from 1 January.

Most suppliers are believed to be on 45 days currently, with no settlement discount. The move outraged suppliers, many of whom have vowed to fight it. This week, Iceland was understood to be in back-to-back meetings with suppliers to discuss the terms. The retailer was unavailable for comment.

Some suppliers have also raised the matter with the commission's groceries inquiry. The episode is likely to strengthen the case for the code to be extended to cover smaller retailers - a proposal made by the commission in its provisional findings. The code currently applies only to any retailer with a market share of 8% or over; Iceland has 1.7% of the market [TNS Worldpanel].

It also emerged this week that just days before it wrote to suppliers, Iceland lodged a submission with the commission insisting it was not necessary to extend the Supermarkets Code of Practice to cover retailers smaller than the big four.

In the submission, Iceland said: "We have seen no evidence whatsoever in your findings or within our own experiences that would support an extension of the code into other categories of grocery. Smaller food retailers do not have sufficient buying power to exert any significant influence over major food suppliers."

The submission drew a stunned reaction from one supplier affected by the changes in terms. He said: "What? Bloody hell. That's barking. Cheeky bastards."

A commission spokesman said the inquiry was taking an interest in the Iceland case. He added: "It doesn't follow that just because a retailer is smaller it doesn't have any influence over its suppliers. It could be a supplier's only customer."

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