For many suppliers, a contract with a supermarket is the food equivalent of the Holy Grail, guaranteeing a reliable income stream. But it can turn out to be a double-edged sword: back in 2007, there were allegations of bribery-style tactics by the supermarkets, who used their power to push down prices and even, in some cases, forced suppliers to shoulder the costs of offers like ‘buy one, get one free’. There were also accusations of price-fixing – although an investigation by the OFT into this was dropped in 2010.
The Government’s initial recommendation was a Grocery Supply Code of Practice, introduced last year. With the new Bill, though, an independent ombudsman will also be drafted in to oversee the code and ‘adjudicate between suppliers and retailers and protect against unfair practices’.
Retailers are, not surprisingly, less than keen on the idea. The British Retail Consortium argues that the inevitable effect of retailers being forced to cough up the estimated £800k a year cost will be to ‘push up prices’ – hardly ideal at a time when all of us are feeling a bit poorer. Farmers have scoffed at that, though, with the National Farmers Union pointing out that ‘these large retailers make enough profit in a couple of hours of trading to cover the cost of an adjudicator for a whole year’.
We’re inclined to agree with that, but it doesn’t mean these plans will necessarily put an end to all the suppliers’ problems. To begin with, it’ll probably be ages before anything happens – the first recommendations were made by the Competition Commission three years ago, and even with the new Bill, it’s estimated no one will fill the new ombudsman post until 2014. And even if it does happen faster, the fact that the ombudsman is being funded by the retailers may leave it open to accusations of favouring the hand that feeds it.
Still, it’s a welcome first step, even if there’s still a long way to go. As they say down on the farm, it’s going to be a reet gert job.