(Yicai Global) Oct. 25 -- Retail giant Carrefour, which opened its first members-only store in China last week, has reported its US-based rival Sam's Club to local authorities due to alleged unfair competition, according to an insider.

Sam's Club, a unit of Wal-Mart Stores, may have violated China's antitrust laws even though it is not appropriate to show the evidence at the moment, a person linked to the French retailer's membership store business said to Yicai Global in an exclusive interview.

A rival is using its market position to force supplies to choose either Carrefour or itself, Carrefour China said in an open letter on Oct. 22, the same day when its first membership store opened in China. The firm didn't disclose the name of the rival. The Boulogne-Billancourt-based retailer's Chinese business, controlled by e-commerce giant Suning.Com, intends to upgrade 100 hypermarkets into members-only stores over the next three years.

New warehouse store openings tend to attract busloads of shoppers in China as clients hunt for discounted luxury handbags and liquor. Meanwhile, Sam's Club, Costco, and Alibaba Group Holding's Hema are increasing the pace of new openings.

Besides halting product supply, some suppliers hired a lot of people to buy back their products on the pioneering Carrefour outlet's opening day, making certain items unavailable for real clients, according to the open letter.

Arkansas-headquartered Wal-Mart did not directly refute Carrefour’s allegations in its response to Yicai Global on Oct. 24. It said that Sam's Club has always focused on legal and compliance operations, welcoming healthy competition. Sam's Club opposes duplicated goods and homogenized competition because it harms consumers' interests, it added.

Suppliers were reluctant to talk about the touchy subject with Yicai Global.

The situation drives suppliers to choose sides. Although Carrefour has been operating supermarkets in China for many years it is still a newcomer in the membership retail model, said an industry insider. Under heavy pressure, profit-seeking suppliers will naturally choose to "abandon" Carrefour, the person added.

Sam's Club is an old player as it entered the Chinese market in 1996. The firm has big plans as it intends to run as many as 45 outlets in the country by December 2022, according to public information. It had 34 stores as of last September.

Membership stores' competitiveness relies on their products, said another industry insider. Having similar products has intensified competition, so some store operators have begun to demand supplier loyalty by various means, the person added.

This is not the first reported battle of supplier connections. Alibaba's Hema X members-only chain has been experiencing similar things since opening the first outlet last October, said Chang Yin, general manager of a Hema X store. In some cities other than Shanghai, certain suppliers have stopped cooperating with Hema X after being pressured by Sam’s Club, the GM added.

Hema is in talks with Carrefour, hoping to partner with the latter to tackle such issues, and firmly opposes the either-or approach, said Chang.

It is too early to pass judgment. The issue still requires authorities to prove whether Sam's Club is responsible even though both Hema and Carrefour point at Sam's Club, said a legal professional. But for now, the situation reflects the sector's fierce competition.

Suppliers are playing the long game. Amid retailers' shift to the membership model, everyone wants to ensure their control over core products while trying to simultaneously weaken their rivals' competitiveness, said Shen Jun, senior retail analyst. Suppliers naturally pick the strongest candidate for future sales, Shen added.

The most fundamental thing that retailers can do to solve this problem is to develop their own products, according to the analyst. Private label items can be completely controlled by retailers, said Shen.

Editor: Emmi Laine, Xiao Yi