Mixed views on supermarket 'mediator'

15 November 2007
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15 November 2007 | Andy Allen

Concerns over retailers' treatment of suppliers have led the Competition Commission to consider the creation of a "supermarkets ombudsman" to mediate disputes.

The commission's provisional report into the UK groceries market said action was needed to "address relationships between retailers and their suppliers".

Although it said the market generally provides good value to the consumer, it added it was concerned about the "transfer of unexpected cost and excessive risk onto the suppliers". Harmful buying practices criticised in the report included buyers returning unsold goods and forcing suppliers to make "retrospective payments" - where suppliers are forced to pay to remain on preferred supplier lists or to contribute towards the cost of marketing or promotions.

As the commission puts together the final version of its report, due in May 2008, it will consider creating an ombudsman to provide "expert assistance" to current regulator the Office of Fair Trading (OFT). It will also explore ways to strengthen the Supermarkets Code of Practice, which regulates retailer-supplier relationships, to protect suppliers.

But the commission's findings received a mixed response. Robin Tapper, senior adviser, food chain relations, at the National Farmers' Union (NFU), agreed a much tighter code of practice was required.

He welcomed plans to develop ways for suppliers to complain confidentially about suppliers. But he said it was important the commission did not water down its recommendations. "We've been here before in 2000 and ended up with a limp code of practice and an OFT that wasn't interested in regulating. But we're delighted the report recognises the continuing downward pressure on prices."

Jim Bradley, associate at legal firm emw law, which called on the commission to crack down on practices such as forcing suppliers to bear the cost of unsold goods, was disappointed. "We got a very verbose, 270-page report and what it proposes is generally either vague or toothless."

He added the proposed ombudsman would be a useless additional layer of regulation. Retailers could simply appeal against its findings and force suppliers into expensive and risky legal action to gain redress, he said.

The New Economics Foundation, which called for a supplier regulator (News, 26 April), said the report had been "hijacked by the supermarkets it was set up to investigate".

Andrew Simms, policy director, said: "Expecting an ombudsman to control the market-distorting power of the supermarkets is like sending someone to build sea defences with a feather duster."


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