UNFI Class Action: Distributor Accused of Unfair Payment Practices

United Natural Foods, Inc. (UNFI), a major U.S. grocery distributor, is being sued by small natural food producer NYSM Organics LLC over claims that it delays supplier payments while applying “prompt-payment” discounts even on late invoices. 

The lawsuit alleges that UNFI’s practices financially harm small food producers, many of whom rely on UNFI to reach essential retailers like Whole Foods, Grocery Dive reports. According to the lawsuit, which isn’t the first UNFI has faced, these actions amount to unfair business practices.

UNFI Delays Supplier Payments, Lawsuit Claims

The lawsuit centers on UNFI’s practice of deducting prompt-payment discounts, intended as incentives for early payments, even when invoices are paid late. This practice is especially damaging to small businesses, the lawsuit claims, as it allows UNFI to reduce payments without delivering timely compensation. 

The lawsuit also highlights UNFI’s frequent “deductions,” which range from fees for breaking down cases of goods to fines for products being out of stock. These charges, according to NYSM Organics, create a financial squeeze for small suppliers who often end up owing money to UNFI, rather than being paid on time. 

UNFI’s grip on the natural food distribution market limits small brands’ options, as switching to another distributor can jeopardize their shelf space in major retailers.

UNFI's Market Dominance Harms Businesses

For small food companies, UNFI serves as a critical link to reaching shoppers at stores like Whole Foods and other prominent retailers. With UNFI’s exclusive multi-year agreement as the primary supplier for Whole Foods, small brands often have no choice but to work with UNFI if they want access to these major retail markets. 

The lawsuit argues that UNFI’s dominance in the sector gives it substantial leverage over small businesses, many of whom rely on Whole Foods as a vital sales channel. For smaller natural food brands, competing in the health-conscious market depends on distribution partnerships that get their products on store shelves, where customers can discover and purchase them.

Lawsuit Cites Consumer Protection Violations

The lawsuit points to the Massachusetts Consumer Protection Act, which shields consumers and businesses from unfair or deceptive practices. The law enables small businesses to seek financial recovery when harmed by dishonest tactics and requires that businesses deal fairly with others, particularly when they hold dominant positions that can influence smaller companies’ livelihoods. 

Other Legal Challenges Against UNFI

This case is not UNFI’s first legal battle. In early 2023, UNFI faced another class action lawsuit accusing the company of misleading investors about its financial performance and operational health, leading to a sharp drop in its stock price. 

Additionally, pet food supplier Omaha Industries recently sued UNFI for allegedly deducting chargebacks from invoices, claiming that UNFI shifted financial risks onto its suppliers without proper justification.

Pilgrim’s Pride was fined $107 million by the Department of Justice for price-fixing broiler chickens, with other lawsuits against food companies accusing them of inflating prices for products like sugar. 

Like the other class action lawsuits, NYSM Organics LLC is seeking to hold a large company accountable for allegedly taking advantage of small businesses and consumers.

Are you a small food producer working with UNFI? Share your experience with their payment practices in the comments below.