The groceries code adjudicator (GCA) has been given the power to fine supermarkets 1% of their annual UK turnover for unfair practices when dealing with suppliers.
For the biggest retailers, fines could run into the hundreds of millions of pounds as a result.
The GCA will be able to fine a retailer if it breaches the groceries supply code of practice – legislation that outlines what the UK’s 10 biggest retailers are and are not allowed to do when dealing with their direct suppliers.
In recent weeks there had been mounting criticism from dairy farmers and the wider farming industry that the GCA lacked teeth and scope to deal with the powers of the supermarkets and the pressures on indirect suppliers.
The move will be welcomed by incumbent GCA, Christine Tacon, who has been waiting a year for the Department for Business, Innovation and Skills to decide the level of fines she could impose.
She had previously said that while she had been given the power to fine retailers, she had not been given an upper limit and therefore was, in effect, unable to impose fines.
Reacting to the news, Ms Tacon said:
“This is an important part of the armoury available to me in carrying out the remit to ensure compliance with the Code and the maximum fine is large enough to act as a significant deterrent to any retailer who might contemplate breaching the Code.
Supermarkets may now think harder about how they deal with their direct suppliers, but most farmers, as indirect suppliers, will still not be covered by her remit.
NFU food chain adviser Tom Lander said:
“While this is good news for those with a direct relationship with retailers, conversations must now begin on how the grocery code can be extended further up the supply chain.
“We need to ensure more farmers are protected from unfair trading practices, which strip value out of the supply chain, affecting both producers and consumers.”
Recognition of the limited remit of the GCA appeared to be absent from business secretary Vince Cable’s comments today.
He said: “I created the GCA to ensure a fair deal for those who supply goods to supermarkets such as farmers and small businesses.
“I am pleased today (29 January) to be giving the adjudicator the final element in a set of powers that will give this new body all the tools it needs to succeed in this challenging and important role.”
No investigations have so far been launched by the GCA because Ms Tacon said she has not received enough evidence from suppliers coming forward. She is also legally prevented from actively looking for evidence.