The government could take stringent action to implement an independent ombudsman to govern the grocery sector, if retailers fail to agree to its establishment.
The Competition Commission has this week begun a public consultation on the proposal for a supermarket ombudsman to observe and implement the new Groceries Supply Code of Practice (GSCP), as the long-standing retail row rolls on.
Both the new code and ombudsman were proposed after a full investigation and report into the grocery industry by the commission that concluded in April last year.
The ombudsman would oversee and investigate disputes in the supply chain under the new GSCP.
In the report, the commission said it would be “seeking legally binding commitments from grocery retailers to establish an ombudsman to oversee the revised code. If we cannot secure suitable undertakings from these grocery retailers, we recommend that government takes the necessary steps to facilitate the establishment of the ombudsman.”
But the consultation that opened this week has provoked mixed reaction in the industry, with the exercise branded “pointless” by the Association of Convenience Stores (ACS) and criticised by the British Retail Consortium (BRC), but welcomed by the National Farmers’ Union (NFU).
Andrew Opie, BRC food director, said: “This should be about customers. The last thing needed at any time, let alone in a recession, is a new multi-million pound bureaucracy.
“Very few farmers deal directly with retailers. 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.
“We have seen no evidence to support claims that retailers are unfairly putting the squeeze on their suppliers. There is already a supplier code, overseen by the Office of Fair Trading, which has long been compulsory for the big four supermarkets. It is expected to be extended to more retailers.”
ACS chief executive James Lowman said: “We are calling on the commission to act now to end the pointless negotiations over a voluntary agreement. Now is the time for ministers to step in and deliver a compulsory solution.”
But NFU president Peter Kendall took a different view, stating: “I am pleased to see that the ombudsman will retain his broad discretion to determine when he should initiate an investigation and I applaud the hybrid funding formula which favours retailers who deal fairly and do not abuse their market power.”
Claims by retailers that the cost of an ombudsman will lead to increased prices for consumers were recently questioned by independent research by leading economist Professor Roger Clarke. He said costs to retailers would be “very small” and may result in lower costs for consumers as a result of improved retail-supply relations.
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