Supermarket watchdog’s remit will not be extended

20 February 2018

The government will not be extending the remit of the groceries code adjudicator (GCA) following a consultation into the work of the independent regulator.

The Department for Business, Energy and Industrial Strategy and the Department for Environment, Food and Rural Affairs said there was not enough evidence to support the extension of the regulator’s remit to take in more retailers and suppliers, despite the consultation identifying unfair trading practices.

A report said submissions to the consultation brought up a number of issues for suppliers, including unfair contract terms, varying specifications, and late payments, but that there was “no clear evidence of systematic widespread market failures”.

In response to these issues the government announced a number of steps it would take to create fairer conditions for suppliers. These include making written contracts mandatory and setting aside £10m of funding support for farmers. The paper also outlined areas the government would keep under review, including how it can better collect and share pricing information and improve long-term contractual arrangements for suppliers.

The National Farmers’ Union welcomed the announcement but said they did not go far enough.

The GCA was created in 2013 to ensure the UK’s top supermarkets did not abuse their large spending powers and treated tier one suppliers in a fair and legal way. The government launched consultation on the regulator’s remit in October 2016 as part of a statutory review.

Responses to the review outlined six main areas of continued concern for suppliers:

  1. Unfair contract terms and varying specifications
  2. A lack of of collective bargaining powers compared to large supermarkets
  3. Late payments
  4. Poor transparency over pricing throughout the supply chain
  5. A failure of processors and abattoirs to sign up to voluntary codes of conduct
  6. The growing spending power of new “non-grocery” retailers not covered by the code

The report found the dairy sector was particularly affected by unfair contract terms, and suppliers generally found varying contract specifications challenging. Suppliers also said they struggled to end contracts in a timely manner when faced with substantial changes to either pricing or terms. 

Half of the suppliers, trade bodies and other organisations that submitted evidence raised concerns about late payments.

The report said large retailers argued against extending GCA’s remit, with several saying the regulator was “successfully delivering against its remit and there [were] dangers in diluting its effectiveness by adding further responsibilities”.

The report did say there was potential to explore “more targeted and proportionate approaches” to help suppliers.

The NFU welcomed the changes introduced by the review, but said they did not go far enough. Meurig Raymond, NFU president, said the consultation showed there was an “imbalance of power” in supermarket supply chains. “The measures that have been announced to address this do not go far enough and it’s a missed opportunity,” he said.

“It’s clear the government recognises that there is an imbalance of power in the food supply chain and that is bad for farm businesses and they are showing some positive will to address this. In addition, the £10 million collaboration fund will be welcome news for all farmers and we look forward to seeing more detail.”

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