Supermarket Watchdog progress

Posted on: 22nd June 2012

At long last, the Government has introduced legislation to stop larger supermarkets from bullying and taking advantage of their smaller suppliers. Liberal Democrats can be proud that this measure is going through and should take credit for what is being achieved to help farmers and growers in the UK and the developing world; who should in turn find that they can operate in a genuinely functioning market rather than the murky world in which supermarket buyers have been able to dictate market conditions and suppliers take what they’re given or face the cold winds of summary delisting.

It hasn’t always been easy. There are still influences even in our own Party who seem to confuse “liberalism” with “libertarianism” and who attempt to argue that it is fundamentally illiberal to interfere with “free markets”, even where it is clear that big companies are guilty of unfairly abusing their market dominance to the disadvantage of smaller ones.

Credit must go to Colin Breed (former MP for South East Cornwall) who’s excellent report in 1998 – “Checking out the Supermarket” – laid the foundation; provoking competition authority investigation followed by a voluntary ‘code’ to encourage fair dealing between larger supermarkets and their suppliers.

But let’s be fair. I have never said that our larger supermarkets are in any way the product of the loins of the devil. They are phenomenally successful (in the main) British businesses and we should be proud of that. Their treatment of suppliers is an entirely rational approach to the market in which they operate. If they didn’t fully exploit their superior negotiating position, especially with suppliers they know full well are largely or completely dependent on their custom, where their arch competitors did, they would lose their competitive edge and market position, etc. The question I raised on behalf of farmers, growers and supplier organisations for the past decade or more has been whether this effective and successful use of market muscle has become an abuse of power.

The GMAG, which I am privileged to chair, pressed for a Competition Inquiry and presented evidence of alleged abuses by supermarkets of their market dominance in the way they treated suppliers, short notice, retrospective changes to verbal contracts; introduction of BOGOF offers which suppliers were forced to pay for; a variety of overriders; late payment of invoices; conditions which forced use of more expensive supermarket hauliers and packaging and in many other ways. Suppliers were over a barrel.

I should make clear that our proposed remedies did not include anything which would suggest price regulation. Some of my beloved Liberal Democrat colleagues have claimed that the Party would in some way protect farm gate prices. That cannot be the case. If we want to introduce price regulation in markets like these we’ll have to rename ourselves the Soviet Democrats!

No, the remedies I and we (the GMAG) proposed to the Competition Commission were just to have some ground rules on fair dealing in the supply chain and for this to be overseen by an inspector of some sort.

We were pleased when in 2008 the Competition Commission produced recommendations which pretty well matched our own. It found in its Inquiry that larger supermarkets were using their market power to ‘transfer excessive risk and unexpected costs’ to suppliers and warned that if action was not taken these practices would ‘have an adverse effect on investment and innovation in the supply chain and, ultimately, on consumers’.

The Commission, after failing to achieve voluntary agreement, used its powers to create a new statutory Groceries Supply Code of Practice (GSCOP) in February 2010 and recommended that Government should create a Supermarket Ombudsman to enforce it. Having been the first to commit to a supermarket watchdog in our 2005 Manifesto by 2010 all three main parties had manifesto commitments to create an Adjudicator, as did the Coalition’s Programme for Government. In 2011 BIS published a draft Bill to create what has become known as a Groceries Code Adjudicator, since when the pressure to introduce the Bill has grown. I’m relieved that the Groceries Code Adjudicator Bill was announced in the 2012 Queen’s Speech.

Supermarkets are still attempting to resist and complaining. However, I keep saying to them, if they have nothing to hide they have nothing to fear from the proposal.

I hope this will proceed through both Houses of Parliament quickly this year and that the Adjudicator will be up and running this autumn.

Last, but not least, I must congratulate both Ed Davey and Norman Lamb for their outstanding contributions to guide this onto the Government’s legislative programme. We’re almost there. I know there are thousands of food producers, farmers and growers who can’t wait ’til the new Adjudicator is in place.



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