No need for more supermarket regulation, says OFT

THE SUPERMARKET code of practice should remain unchanged, but be used more effectively, a report by the Office of Fair Trading has concluded.

The OFT published its conclusions to the code of practice and other competition issue on Wed (Aug 3) in which it said “consumers are benefiting from competition in grocery retailing, and evidence has not come forward that the code is being breached”.

The OFT received 29 responses to its invitation for comments on the findings of the supermarkets code compliance audit report and the wider role of supermarkets in the supply of groceries and other goods.

In its report the OFT says that evidence had not been provided to show that the supermarkets code should be replaced or that the market for the supply of groceries and other goods is not working well for consumers.

Without clear evidence that the code is not working, or that competition in the market is being restricted or distorted, the OFT does not have grounds to refer the market to the Competition Commission or to launch a new market study.

The OFT will continue to encourage the use of the code and work with supermarkets and suppliers to improve its practical usefulness. This initiative will include:

• working with supermarkets to ensure written records of supermarket-supplier dealings are kept, allowing for greater transparency in the terms of business
• regularly monitoring supermarkets’ code compliance procedures
• confirming that trade associations can take group actions on behalf of their members under the code with sufficient evidence.

The OFT considered that the submissions it received demonstrated a widespread misunderstanding about the code and the OFT’s responsibilities.

The code is statutory and applies to ASDA, Sainsbury’s and Tesco in respect of their direct dealings with suppliers.

The purpose of the code is to put relations between the supermarkets and their suppliers on a clearer and more predictable basis by outlining parameters within which business should be conducted.

“The Code is not meant to shield suppliers from hard bargaining driven by supermarket competition, but to help ensure that suppliers’ deals with the supermarkets are honoured,” said the OFT.

“Effective competition and straight dealing promote quality, keen pricing and consumer choice,” it added.