The ongoing supermarket power price wars are damaging the UK food supply chain and creating a climate of fear, according to UK farming unions.
In a report submitted to the Office of Fair Trading (OFT), the NFU, NFU Scotland, Ulster Farmers Union and NFU Cymru recommended the scope of the OFT retailer referral to the Competition Commission should be extended.
The NFU advised that a consultation should analyse the impact of today’s food retailers on their suppliers.
Richard Macdonald, director general of the NFU, said: “The Competition Commission has looked at the power of supermarkets before in 2000. They recommended a code of conduct which has failed to make any real difference. Since then the retailers have continued to operate unchecked and are seriously damaging the British supply chain.”
The NFU claims it has built up a catalogue of complaints about supermarket and other retailer practice which suppliers will not talk publicly about due to fear.
Producers have complained that retailers insist all printed labels are sourced from a list of recognised suppliers even though excellent quality labels can be sourced locally at a fraction of the cost.
They have also objected to short or even retrospective notice from retailers about contract changes and the fact suppliers are asked to pay the retailer a percentage of turnover, annually, as a gesture of goodwill.
The submission calls for a longer-term view to be taken of supermarket price wars.
At face value, supermarket price wars have the effect of driving down prices and therefore supplying customers with cheaper products, it said.
But, real damage is being done further down the supply chain where businesses cannot cope with the continued downward pressure on prices, particularly as input costs - like energy and labour - are increasing, and this will ultimately affect product choice, availability and continued UK production, it warned.
Macdonald said the retailers were stripping suppliers of the ability to compete and grow their businesses.
“The farming unions are not against big business and we do not want to see efficient businesses penalised. However, we are against abuse of power and the lack of regard for the business pressures on others in the supply chain. We therefore urge the OFT to make the referral to the Competition Commission and to ensure that this is a full review with no restrictions or limitations,” he added.
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