The groceries code adjudicator is a regulator designed to enforce fair dealing between the UK’s 10 big supermarkets and their direct suppliers.
Extending its remit to cover indirect suppliers, including many farmers, was first suggested by the Competition Commission as far back as 2008.
Such a move would help to tackle unfair trading practices in food supply chains, safeguard the consumer offering and would be welcomed by farmers and small businesses, who sometimes face late payments, unfair hidden charges and a lack of transparency.
Yet ministers seem nervous of going in that direction, which begs the question “why?”
There are various myths that present the extension of the GCA as unwise or unworkable. It’s time these myths were tackled.
Myth 1: There are more pressing things the government should be getting on with – like Brexit
Brexit is certainly placing strain on the food supply chains serving the UK market. For farmers and small food businesses that lie outside the remit of the GCA, Brexit-related uncertainty about trade, regulation and labour availability worsens an already precarious position.
These groups are exposed to unfair trading practices that can make it impossible to predict their income month-to-month.
Furthermore, at times of unpredictability, retailers and large processors are particularly apt at passing risk and cost on to their supply chains, which can cause competent suppliers to go bankrupt.
Extending the GCA to ensure that suppliers are not subjected to abusive purchasing practices is an important way that government can safeguard the food sector against the impact of Brexit.
Without such protection, farmers and food businesses may struggle to produce the high-quality range of groceries that consumers are used to.
Myth 2: Extending the GCA’s remit to cover thousands of suppliers would entail unimaginable complexity
This is a fatalist line of argument. The UK already regulates huge sectors such as finance and utilities. In regulating our largest supermarkets, the GCA has already got to grips with a complex sector with lots of different supply chain relationships.
The GCA has approached this challenge strategically: advertising its role, gathering information from a range of sources and prioritising which issues warrant further investigation.
There is no reason why this same approach would need to change as the remit is widened.
Myth 3: An extended GCA would mean high prices for consumers
The GCA’s annual budget is currently about £2m. The cost of an enlarged body would still be tiny compared with the overall value of the groceries sector, and dwarfed by other considerations such as the fluctuating value of the pound and tariffs applied to agricultural imports.
There is no evidence to suggest that paying extra for a regulator will translate to higher consumer prices. In fact, unfair trading practices often lead to inefficiencies and waste. A GCA that supported improved purchasing practices could eliminate some of this waste, leading to lower costs in the supply chain. These savings could be passed to the consumer.
Myth 4: The GCA can’t enforce supplier behaviour since the Groceries Supply Code of Practice only applies to the supermarket-direct supplier relationship
The government can still add to the GCA’s remit through legislation. The GCA was established to enforce the code of practice – which was designed to cover the relationship between supermarkets and direct suppliers. But the principles behind these provisions could easily be applied to cover indirect suppliers with a similar code.
This is hardly a radical proposal. Indeed it was suggested in 2008 by the Competition Commission’s report that led to the establishment of the GCA.
This stated that the code could be extended “if it subsequently appears that, despite the operation of the code, intermediaries continue to transfer excessive risk and unexpected cost further up the supply chain”.
Sometime in the coming weeks the government is due to publish its plans for the future of the GCA.
The content of that announcement will demonstrate whether ministers are aware of the stresses being experienced by food supply chains, and whether they are serious about supporting a competitive and sustainable groceries sector.
Given the uncertainties about Brexit, an extension to the GCA’s remit is long overdue. The food sector wants to see it, and it would be to the benefit of consumers as well as farmers.