The Office of Fair Trading’s referral of the grocery market to the Competition Commission has largely been welcomed by producer representatives - as long as it tackles supplier-retailer relationships adequately, they say.
The National Farmers Union has said the announcement is good news for consumers and suppliers of grocery products.
NFU president Peter Kendall said: “I am pleased the OFT has acknowledged the potential impact the power of the retailers can have on suppliers. The Competition Commission will get the opportunity to investigate these examples in more detail and we must find a mechanism which allows suppliers to speak freely to the CC without the fear of losing valuable business contracts.”
He said the NFU will be submitting detailed evidence to the Competition Commission and it is looking for examples of supply chain relationships from suppliers and others in the supply chain to help compile. “This market investigation provides an excellent chance to create an environment which delivers a supply chain built on trust and transparency… We must not miss this opportunity.”
Meanwhile, others are more skeptical of what this new investigation can achieve. “The Office of Fair Trading (OFT) and the Competition Commission, has together twice failed to stumble on sufficient evidence to prove what every man and his dog in the UK grocery industry is familiar with: the financial distress caused on suppliers by the market power wielded by the major multiples,” said Duncan Swift, head of Grant Thornton's food & agribusiness recovery group.
As a business and financial adviser to the food supply chain, Swift said Grant Thornton often saw examples of disproportionate supermarket power
damaging suppliers.
"The reality within the industry is one where suppliers are in most cases having to deal with supermarkets, without written business terms. What this inevitably leads to is a plethora of disasters for suppliers who end up having their orders cancelled at the eleventh hour, being asked to invest
in their operations and new products only to then be de-listed with little or no notice, and, more recently, being asked for retrospective
contributions with some suppliers being presented with bills for millions of pounds. With no written terms suppliers have no protection. If they sought protection through written terms I doubt whether they would get the business in the first place.”
“While it is regrettable that, at best, beleaguered suppliers will not see
any action on the future findings for another two to three years, news of a further probe may, albeit with some skepticism, raise the spirits of some supermarket suppliers who will be hoping it is third time lucky to
redress a more level playing field in their day to day business affairs.”
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