A partial victory for suppliers has been claimed following the Competition Commission’s provisional report out this week.
The body concluded action is indeed required to address supplier relationships with retailers and the code of practice should be extended and tightened.
While the report found no significant barriers to entry or expansion for small suppliers, the commission stated that it did have concerns about the effect of the multiples’ buying practices. It made particular mention of this in respect of their impact on suppliers’ ability to reinvest in their businesses. “The CC is concerned about the ability of grocery retailers to transfer excessive risk and costs to suppliers through various purchasing practices, such as retrospective changes to supply agreements,” said commission chairman Peter Freeman. “The CC considers that these practices could damage investment and innovation in the supply chain to the ultimate detriment of consumers.”
Among remedies suggested by the commission are the inclusion of more retailers in the scope of the code of practice - including symbol groups - and the tightening of its provisions, as well as changing arrangements for its monitoring and enforcement, raising the possibility of an ombudsman.
The national farmers’ unions in England and Wales and in Scotland (NFU and NFUS respectively) are “pleased” with the findings and “commend” the commission on its work.
The report has been also been welcomed by Asda executive director, John Longworth, largely because of the stance it took on the planning issue and land banks. “We think it’s significant that the commission has highlighted that planning is restraining competition and is preventing adequate choice and diversity at a local level. A change in the planning system would allow more competition.”
Tesco was more mealy-mouthed following the report than Sir Terry Leahy had been in his column in The Sun before its release. “As in other inquiries, they have set out a wide range of possible remedies,” said Lucy Neville-Rolfe, Tesco executive director of corporate and legal affairs. “Our job is to make sure that any remedies are justified, have no perverse effects and that the consumer is the winner.”
The Association of Convenience Stores welcomed the report with a few notes of caution, but the environmental lobby has been left disappointed. Friends of the Earth panned the report as an “inadequate response to supermarket bullies”.
The commission is now inviting submissions on these findings and remedies to Groceries@cc.gsi.gov.uk
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