UK Competition Commission recommends establishing Ombudsman

Planet Retail 4 Aug 2009

The UK Competition Commission has formally recommended that the Department for Business, Innovation and Skills (BIS) should establish an Ombudsman to arbitrate on disputes between grocery retailers and suppliers. The Ombudsman will also investigate complaints under the new Groceries Supply Code of Practice (GSCOP).

The Competition Commission has published the order setting out the GSCOP, the formal recommendation to BIS and a covering letter to the Minister of State at BIS, Kevin Brennan on its website, www.competition-commission.org.uk.

Retailers covered by the order now have six months to comply. While the Competition Commission does not have the power to establish the Ombudsman itself, it has been trying to secure the agreement of retailers, making it clear that without this, it would recommend that BIS establish the Ombudsman instead. After the majority of retailers declined to agree, the Competition Commission is pressing ahead with the recommendation.

Competition Commission Chairman and Chairman of the Groceries Inquiry, Peter Freeman said: "Our inquiry clearly revealed problems that require action and which, if left unchecked, would damage the consumer. We continue to believe that everyone's interests-and that includes retailers-would be served by tackling a problem that has clouded the industry for many years now. The current economic difficulties if anything reinforce rather than reduce the need for action. Whilst some retailers have recognised this, regrettably the majority have not. We made every effort to persuade retailers of our case as it would be the quickest way to establish the Ombudsman. We are now left with no alternative but to set out the new Code of Practice and recommend that BIS set up the Ombudsman to oversee its operation."

The GSCOP is based on the existing Supermarkets Code of Practice but will be amended so that: the GSCOP provisions are included in every contract between grocery retailers and their suppliers; all retailers with groceries turnover in excess of GBP1 billion (USD1.63 billion) per year are included; an overarching fair dealing provision is included; retailers are prohibited from making retrospective adjustments to terms and conditions; retailers are prohibited from entering into arrangements that make suppliers liable for losses due to shrinkage; retailers are required to enter binding arbitration to resolve any dispute with a supplier; and retailers are require to keep written records of all agreements with suppliers on terms and conditions of supply. The Ombudsman will be appointed by the Office of Fair Trading, which will also set an annual budget for costs and expenses, which will be covered by retailers using a formula which takes into account its size and number of complaints.

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See also: "Lib Dems vow to get tough with supermarkets" FWi 21 September, 2009

UK: The Liberal Democrats have pledged to introduce a supermarket regulator if they form the next government.

In a keynote speech to his party's annual conference in Bournemouth, shadow DEFRA secretary Tim Farron called for fair trade for all farmers.

"We have the tragic irony of millions of consumers going to the supermarket each week, going down one aisle and buying fair trade Colombian coffee and then going down the next aisle and buying the milk to put in that fair trade coffee from an exploited British dairy farmer."

It shouldn't matter whether a farmer was from Colombia or Cumbria, Mr Farron told delegates on Monday (21 September).

"Supermarket greed is forcing farmers out of business. So while world food demand is set to double over the next 40 years, we are losing the capacity to produce it.

"This situation is not just immoral, it's completely stupid."

The "big beasts" of the food market were behaving the way the big banks had done - risking the future for the sake of short term gain.

Thousands of farmers were seeing their lives work go down the plughole, said Mr Farron.

"So I pledge to you that I will introduce a powerful food market regulator to enforce fair trade for British farmers."

It was wrong that farmers were going under.

Hill farmers were working 80 hours a week for an annual income of £8000 because supermarkets had them over a barrel.

At the same time, the price supermarkets paid farmers for milk had fallen by nearly one third - but the retail price for a litre of milk had hardly changed.

"The farmers incomes are slashed, the consumers don't benefit, the supermarkets pocket the difference."

Mr Farron said thousands of farmers were surviving on an hourly rate less than he received for stacking shelves when a teenager.

"They are working 15 hours a day, seven days a week, with no holidays, with no security of accommodation and reliant on farm payments."

There would be no need for farm payments if farmers got a fair price for their produce, Mr Farron claimed.

The same exploitation happened right across our food market in every sector of farming, he added