26 April 2001 | Robin Parker
Interpretations of "reasonable conduct" will make or break the Department of Trade and Industry's proposed guidelines on supplier relationships with the food sector, according to both supermarkets and suppliers.
The document recommends enforcing prompt payments to suppliers and asks supermarkets not to be "unreasonable" when asking them to contribute to marketing costs or short-notice price reductions.
The Office of Fair Trading (OFT) said its draft code, announced earlier this month, is "less prescriptive" than the DTI's initial recommendations. It will apply to Somerfield, Tesco, Asda, Safeway and Sainsbury's, whose buying practices were creating a "complex monopoly situation", according to last year's Competition Commission report.
The OFT draft was prepared following discussions with supermarkets and trade groups, which told the OFT there was a need to secure flexibility in choosing or dropping suppliers.
The supermarkets involved drew up their own voluntary codes of practice prior to the commission's report. But the new government code will be statutory, with breaches punishable by a potential charge of contempt of court.
The OFT will clarify the code's wording before handing a final version to Stephen Byers, the secretary of state for trade and industry, late next month.
"While we recognise the need for a code, it would be a year of trial and error until we can see specific examples of 'unreasonable' practices," Martin White, Sainsbury's supply chain director, told SM. "We will comply with the law, but that's not to say there aren't aspects of the code we're uncomfortable with."
A spokesman for Safeway regretted that voluntary codes were not given a chance. "If they'd been ineffective, it would have justified the need for a statutory code," he said.