The Competition Commission's recommendation of introducing an independent ombudsman as part of a new Groceries Supply Code of Practice (GSCOP) is a major victory for suppliers, but its success will depend on how proactive the ombudsman is allowed to be in investigating and pursuing unfair trading arrangements, according to Duncan Swift, head of Grant Thornton’s Food and Agribusiness Recovery Group.
In noting that the Competition Commission referred to Grant Thornton’s Food Supplier Survey on supply chain issues of concern to suppliers ('Redressing the balance: Forging a more certain future for the UK supply chain', August 2007) to corroborate its own findings, Swift said: “We applaud the Competition Commission for taking the brave decision to recommend an independent grocery supply ombudsman, but it is clear the appointment is not a certainty, and that there are several steps which may take some time - certainly months, possibly at least a year - to conclude before such an appointment is made. Therefore, the battle is far from over.
“One of the key failings of the previous system was the fear many supermarket suppliers had of coming forward to the Office of Fair Trading and risking supermarket ill will. This led many to the mistaken belief that there were few problems in the supply chain to deal with. Again, this won’t change with an ombudsman unless the role is well resourced and charged with proactively sampling past and present supplier relationships, rather than simply following up complaints,” Swift said.
He also questioned the suggestion that an ombudsman was going to cost either the supermarkets, or consumers, millions. “The Competition Commission has considered the cost of an ombudsman, and the regulatory impact upon the retailers subject to the GSCOP, and they estimate these costs to be about £4m-£5.5m, which are a fraction of the total value of the supply chain at £70bn and also relative to the profitability of the retailers concerned, which runs into the billions. Therefore we expect this will have no discernible cost impact upon consumers.
“Indeed, if the relationships between supermarkets and suppliers are in such good health, as has often been stated by the major supermarkets, why would there be a cost of hundreds of millions of pounds to the supermarkets, as has been suggested by certain retailers in the wake of the report's publication?”
Swift said he would expect an ombudsman to consider not only the interests of suppliers, but also other stakeholders, including their employees, the supermarkets themselves and consumers in determining a fair resolution in disputes.
“Therefore the supermarkets should have little to fear if they are confident in the fairness of their supplier relationships,” he added.
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