The Competition Commission has called on the government to force retailers to sign up to a supermarket ombudsman.

The Commission formally recommended the establishment of a watchdog to the Department for Business, Innovation and Skills on Tuesday (4 August) after retailers refused to voluntarily sign up to an arbitration scheme.

It also published final plans for an updated Groceries Supply Code of Practice (GSCOP) to address concerns about the relationships between suppliers and retailers.

The steps follow the Commission’s inquiry into the UK grocery market, which concluded that measures were needed to monitor the way supermarkets dealt with their suppliers.

While retailers covered by the GSCOP will be forced to comply with the updated code within six months, the Commission does not have the power to establish an ombudsman.

As the majority of retailers had refused to sign up to the ombudsman scheme, the Commission said it had no choice than to press ahead with making the recommendation to government.

“Our inquiry clearly revealed problems that require action and which, if left unchecked, would damage the consumer,” said Peter Freeman, Commission chairman and chairman of the Groceries inquiry.

“We continue to believe that everyone’s interests, including 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.”

Mr Freeman said the Commission had made “every effort” to persuade retailers to sign up to an ombudsman scheme and was left with no alternative than to ask the government to implement a watchdog.

“It is clearly desirable that the Ombudsman be established as soon as is practicable,” he added.

“The new Code of Practice will work much better as a result and suppliers and retailers will have greater confidence that its terms will be observed.

“The costs of the Ombudsman, which we think would be about £5 million a year in total including initial set-up costs, are very modest compared with the annual turnover of £70 billion in grocery supplies to retailers.

“It is obviously for the Department for Business, Innovation and Skills to consider these matters very carefully but we are making our views as clear as we can.”

The GSCOP will cover all retailers’ contracts with suppliers and will aim to ensure unexpected or unfair costs are not imposed on them.