13 October 2000

Legally binding code of

practice for supermarts

By Isabel Davies

FARM industry leaders have welcomed the Competition Commissions ruling that supermarkets should abide by a legally binding code of practice governing the relationship between retailers and suppliers.

After days of "will they, wont they?", the Department of Trade and Industry released the commissions report on Tuesday (Oct 10).

It concluded that the industry was "broadly competitive" but said there were three areas of concern. The first of these was the relationship between supermarket chains and their suppliers, which needed to be put on a "clearer and more predictable basis".

Announcing his response to the findings, trade secretary Stephen Byers said: "I agree that a code of practice should be introduced. Like the commission, I do not believe that a voluntary code would be adequate."

He said the Director-General of Fair Trading would be asked to approach those supermarket chains with 8% or more of the market (currently Asda, Safeway, Sainsbury, Somerfield and Tesco) to agree to a code within the next three months.

Key points proposed to be enshrined in the code include a recommendation that suppliers should be given reasonable notice if the volume of orders is to change, and provisions for resolution of disputes.

The NFU said it was delighted that the Competition Commission had seen fit to make a code of practice legally binding.

But while the NFU said it was happy for the code to be policed by the Director-General of Fair Trading, other bodies have expressed a desire to see a dedicated watchdog appointed.

The FUW said that unless a regulatory watchdog was established with strong legal powers to police the code, then farmers would continue to suffer a raw deal.

George Dunn, chief executive of the Tenant Farmers Association, added: "We will be looking for an ombudsman to be appointed who can be dedicated to the task of overseeing the code."

The Scottish NFU said it was disappointed that no action would be taken to prevent supermarkets selling below cost.

"It must be recognised that the financial burden of reducing retail prices below cost is passed back down the supply chain and in many instances borne by the producer," said union vice-president Peter Stewart.

But although the commission identified this practice as a problem, it said remedies "would be disproportionate to the adverse effects found".

The lack of action on pricing policies was also questioned by Colin Breed, rural affairs spokesman for the Liberal Democrats, who described the report as "anaemic".

"Supermarkets are like a pack of dogs," he said. "They may snap at each other but they hunt in packs against suppliers and this report does not recognise that at all."