The chief of Scotland’s farming union has branded the element of fear within the supply chain to UK supermarkets “totally unacceptable ” and said complaining to the OFT is “too risky”.

NFU Scotland has urged the Office of Fair Trading and UK government to establish an independent regulator to ensure fair trade between the major supermarkets and their suppliers.

The Union has made the call after collecting evidence from Scotland’s top food and drink processors on how supermarkets misuse their dominant position. It concurs with the OFT that fear amongst supermarket suppliers of complaining against ill treatment prevents anyone using the Code to settle disputes. However, NFUS wants an independent regulator to investigate anonymous complaints and protect suppliers from reprisals.

The majority of suppliers NFUS contacted as part of its review process for the OFT would only share their experiences on condition of strict confidentiality and none of the allegations of misuse of supermarket power can be attributed.

But the Union said it has been told of the following supermarket practices:

• Loyalty payments (also known as slotting fees, charged to buy shelf space) are still demanded. Non payment can result in the loss of business.

• The fees charged for artwork and re-packaging of products are enforced and not negotiated.

• Supermarkets like to ‘manage’ the public statements of their suppliers.

• The concept of ‘reasonableness’ in changing contract terms, particularly payment terms, is one-sided.

• The renegotiation of supermarket contracts is not always determined by price and quality of service. There is evidence that contracts can be awarded to a supermarket’s competitor simply to reduce that supplier’s negotiating power and to maintain the supermarket dominant position.

NFUS stressed that not all feedback from suppliers was negative. It did receive evidence that emphasised that there were many positive aspects to the supermarket and supplier relationship. However, it was clear from the overall evidence that current activity within the UK food and drinks industry is affecting competition, said the NFUS.

Its president John Kinnaird said: “The public silence amongst supermarket’s suppliers speaks volumes. It is of absolutely no surprise that the OFT has received virtually no evidence of breaches of the Supermarkets Code of Practice. Many of the companies that we contacted required repeated assurances from us that any comments they made would never be attributed to them. That kind of fear within the food supply chain is totally unacceptable.

“I completely accept that when the supermarket and supplier relationship works, it is hugely beneficial to both parties. But surely in a society where supermarkets have an increasing grip on food and drink sales, there must be a check in the system when that relationship breaks down?

“The Supermarket Code will continue to be toothless unless those who feel mistreated by the supermarkets have anonymity to complain and protection from reprisals. Hearing what I have heard from our top food companies, there is no way I would publicly complain either. It is just too risky," Kinnaird said.

“An independent regulator is required to police the trading environment. It needs power to act where there are breaches of the Code and it needs to protect complainants from reprisals. The OFT asserts that the current market works well for consumers. However, it is consumers that will ultimately suffer from the current trends. The continuing reduction in Scotland’s food processing industry and fewer rural businesses will only restrict consumer choice. If nothing else, a regulator may help rebuild trust where it has clearly broken down.”

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