Proposals for a voluntary ombudsman to oversee retailer-supplier relationships look set to collapse, with the big four multiples bringing plans to a crunching halt.

Business secretary Lord Mandelson’s newly formed Department for Business, Innovation and Skills (DBIS) will take on the possible enforcement of the regulator if the big four supermarkets fail to agree to the Competition Commission’s plans as expected.

Members of the commission are understood to be meeting this week to make the final decision on the matter. If talks fail, the DBIS’s involvement will switch the watchdog’s role from a voluntary to a mandatory one if approved.

The commission started a public consultation process on the long-awaited establishment of the ombudsman to implement the Groceries Supply Code of Practice at the end of April, after finding some evidence of harsh treatment of suppliers, but earlier this month reports from the talks revealed little progress had been made.

Some suppliers hope introducing an ombudsman on a statutory footing would bring about the possibility of punitive fines for breach of the proposed code of conduct, create more extensive powers of intervention in the supply chain and make compliance with a grocery suppliers Code of Practice a direct obligation.

But Tesco, Asda, Sainsbury’s and Morrisons continue to oppose the move, arguing that cost and enforcement problems would stand in the way the way of an efficient system.

Richard Dodd of the British Retail Consortium told freshinfo the figures didn’t add up and the customer would end up bearing the cost of the new watchdog.

“Our position hasn’t changed - the ombudsman is completely unnecessary and is a cost that will filter through to the price of goods and the customer," he said.

“There aren’t any fundamental problems with the relationships between retailers and their suppliers. The job of the commission is to ensure that competition is functioning properly so customers can enjoy the benefits of a functioning market.

“There is already a supply code overseen by the Office of Fair Trading that is being extended to encompass a bigger range of retailers, and the supermarkets are comfortable with that.”

But 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, who said costs to retailers would be “very small” and may result in lower costs for consumers as a result of improved retail-supply relations.

The Association of Convenience Stores' chief executive James Lowman told freshinfo: “Some of the practices employed by the larger retailers are directly against the consumer’s interest - it’s about fairer relationships in the main, but there are also benefits for consumers, so it is extremely disappointing that it is stalling. We always thought a voluntary agreement was unlikely and of course no one wants undue costs and bureaucracy, but it would have been ideal as a binding remedy.

“Some of the practices employed create more risk to the suppliers by hammering the prices down and making it harder and harder for suppliers to invest and innovate. We have been lobbying ministers and the commission - it is very clear we need an ombudsman."

It has been argued that, ahead of a general election next year, the proposals may be held up in the political process, but many feel that statutory intervention is the only available option remaining.

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