Supermarkets favoured by biased code, warn suppliers

3 January 2002
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03 January 2002 | Robin Parker

Revamped guidelines to settle disputes in the food retail sector have been watered down and will not curb supermarkets' powerful grip on suppliers, trade bodies have warned.

Supplier groups including the British Brands Group (BBG) and the Fair Deal Group (FDG) claim the code of practice, drawn up by the Office of Fair Trading, favours supermarkets when in dispute with their suppliers.

The code says supermarkets should negotiate "in good faith" with suppliers for up to 90 days, after which they should use an independent mediator.

Ian Dent, chief executive of the Packaging Federation, a founder member of the FDG, said the code has failed to take power out of retailers' hands.

"After 90 days of bilateral negotiation, the more powerful player would be pretty dominant," he said. "There is nothing to fall back on to measure the appropriate penalties for retailers."

The code, recently approved by the Department of Trade and Industry (DTI), will be implemented on 17 March.

It enforces supply management practices previously covered by voluntary internal codes, including prompt payment and reasonable notice of change to supply procedures.

As in the code's first draft, suppliers are concerned how supermarkets will interpret its demand for "reasonable" behaviour.

John Noble, director of the BBG, said that although this code aims to define "reasonable" demands, it is still not clear enough. "The word 'reasonable' is open to interpretation, and depends on retailers to act in the spirit of the code," he said.

Tony Blair, the prime minister, accused supermarkets of putting their suppliers "in an armlock" after a Competition Commission investigation in 2000.

Noble said the DTI's recommendations at the time were far more clear-cut.

"The commission identified abusive, monopolistic practices, but the code has been watered down from their requests," he told SM.


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