Supermarkets guilty of supplier abuse, says Competition Commission

The Competition Commission (the CC) has concluded that the Supermarket Code of Practice is not sufficient to prevent supermarkets abusing suppliers.

In its provisional findings of its inquiry into competition within the grocery sector, the CC expresses concern about the “ability of grocery retailers to transfer excessive risk and costs to suppliers through various purchasing practices, such as retrospective changes to supply agreements”.

It adds: “The CC considers that these practices could damage investment and innovation in the supply chain to the ultimate detriment of consumers.”

However, it notes that the exercising of buyer power through such practices “is a feature of the markets for the supply of groceries by all grocery stores”.

To remedy the situation so that suppliers continue to operate in a manner that is in the long term interests of consumers the CC has proposed a series of measures designed to address the situation.

These proposals primarily focus on the Supermarket Code of Practice and whether it is sufficient in its current form to give suppliers the protection they need. 

But the CC is also seeking views on whether the Office of Fair Trading is best placed to monitor compliance with the Supermarket Code of Practice and would a ‘supermarkets ombudsman’ be appropriate.

The NFU welcomed the CC’s report saying “action was urgently needed” to redress the balance of power in the supply chain.

NFU President, Peter Kendall, said: “We submitted detailed evidence on the widespread abuse of supermarket power, and we are not in the least bit surprised that the Competition Commission has accepted that this has happened and does need to be addressed.
“It is in everyone’s interests that the food supply chain is vibrant, dynamic, transparent and profitable, so that farmers and growers are able to supply the quality and choice that consumers expect and deserve.”

Concerned parties have until 23 November 2007 to express views on the proposed remedies or suggest additional or alternative actions they wish the CC to consider.

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