The Competition Commission has announced it has formally recommended the establishment of a grocery ombudsman to the department for business, Innovation and skills (BIS), provoking feverish opinion on both sides of the argument.

Many supermarket suppliers and representatives believe that the establishment of an ombudsman to oversee the new Groceries Supply Code of Practice is a must - however, the retail sector is staunchly against the proposals citing reasons of time and cost.

The British Retail Consortium (BRC) branded the proposals “expensive and unnecessary” and called on Lord Mandelson, who leads the BIS, to reject the plans to ensure customers are not penalised.

The National Farmers’ Union (NFU) backed the move and called on the government to ensure an ombudsman is put in place to oversee the code.

NFU president Peter Kendall said: “The Competition Commission’s order and ombudsman recommendation follows many failed attempts to get major retailers to introduce voluntary measures themselves and a prolonged and forensic investigation by the commission. This is an important day for suppliers, including farmers, and I’m absolutely delighted at the news. There is now no logical reason for the government not to act in full on the commission’s findings.

“The new code will only work if proactively and robustly enforced so the climate of fear that suppliers endure can be eliminated. This can only be achieved through the implementation of an ombudsman.

“The government has said it will act in the best interests of consumers and it seems clear that the establishment of an ombudsman will give suppliers the confidence to invest and to innovate which will, in turn, improve consumer choice, produce better products and ensure food remains affordable.

But BRC food director Andrew Opie lambasted the move. He said: “This should be about customers. The last thing needed at any time, let alone in a recession, is a multi-million pound bureaucracy, unnecessarily piling on costs and pushing up shop prices.

“Does anyone seriously believe a quango can be run for the £5 million a year the Competition Commission claims? And that ignores the massive knock-on costs that will be generated within retailers’ own businesses. In the end, it’s customers who’ll foot the bill.

“Most supermarket suppliers are multi-national food businesses perfectly able to stand up for themselves. Retailers are right to defend customers’ interests by negotiating robustly with them. Very few farmers deal directly with supermarkets.

“Supermarket/supplier relationships are not a free-for-all. There’s already a Grocery Supplier Code of Practice (GSCOP), overseen by the Office of Fair Trading. This has long been compulsory for the ‘big four’ supermarkets. The GSCOP has now been expanded to include more supermarkets.”

The Association of Convenience Stores chief executive James Lowman called on a quick implementation of the move. He said: “Introducing an ombudsman is a proportionate, affordable and necessary response to the consumer harm identified by the two year grocery investigation. The government must act swiftly on this recommendation.”

Simon McRae, senior campaigns officer at War on Want which campaigns against poverty, said: “In order to keep prices low and profits high, British supermarkets cut costs by squeezing suppliers abroad.

"These cuts are passed on to workers in the developing world who earn a pittance and suffer from appalling conditions.

“Lord Mandelson should establish an independent supermarket ombudsman. The government must ensure the watchdog is given sufficient powers and is proactive in gathering evidence from suppliers, including primary producers and overseas suppliers.”