10 October 2000
Supermarkets to have code of practice

By FWi staff

BRITAINS big five supermarkets have been told by monopoly watchdogs to agree a new legally binding code of practice with farmers and other suppliers.

This follows concerns that Tesco, Sainsburys, Asda, Safeway and Somerfield were pressurising farmers to accept low prices for their goods.

In its report on the industry the Competition Commission said a code would put relations between stores and suppliers “on a clearer and more predicable basis”.

The code will include provision for independent dispute resolution.

Announcing his response to this finding, Trade and Industry 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.

“The relevant supermarkets will have to give legally binding undertakings to comply with the remedies.”

He said he wanted the matter resolved quickly and Director General of Fair Trading to report back within three months.

Among items covered by the code are:

  • Retailers should ensure that the standard terms in which they do business are available in writing to suppliers;
  • Suppliers should be given reasonable notice if these terms change;
  • Retailers should pay suppliers within the time specified in the agreement;
  • Retailers should give suppliers reasonable notice of any intention to change a price previously agreed;
  • Retailers should not expect suppliers to pay towards buyer visits, artwork or market research;
  • Retailers should compensate suppliers for costs caused through the retailers forecasting errors;
  • Retailers should not require that suppliers use a particular third party.

The Competition Commission also expressed concern about supermarkets selling below cost and the concentration of chains in some areas.

But despite widespread predictions in newspapers, it did not recommend a change to the planning regime.

On balance, the Commission concluded that supermarkets were “broadly competitive”.

And Mr Byers said since the enquiry was launched the market had become competitive.

“Since the reference…to the Competition Commission in April 1999, we have seen significant changes to the industry, the entry of Wal-Mart being a notable example, and a number of price cuts which it is estimated have been worth over 1bn to the consumer.”