Government To Create Supermarket Adjudicator

by kamcity.com - 03/08/2010

"Suppliers and farmers will have the power to complain to a Groceries Code Adjudicator (GCA) about their treatment by the major supermarket multiples, under plans published today by the government’s business department. "

The decision to create an adjudicator, rather than an ombudsman, comes after months of lobbying on the part of supermarket chains against the introduction of a watchdog.

The government today published the response to its consultation to take forward the establishment of a body to monitor and enforce the Groceries Supply Code of Practice (GSCOP), which took effect in February (see GSCOP - The Retailer’s Perspective). The Department for Business will bring forward new legislation in order to set up the GCA, which will reside within the Office of Fair Trading (OFT).

The GCA will have the power to receive complaints about the way supermarkets interact with their primary suppliers from anyone in the supply chain at home or overseas, and deal with them anonymously. This includes farmers who may not directly supply the large supermarkets. A government statement said although non-governmental organisations, trade associations and other organisations cannot lodge complaints directly, they still have a useful role to play in offering advice and assistance to their stakeholders.

Consumer Minister Edward Davey said, "We want to make sure that large retailers can't abuse their power by transferring excessive risks or unexpected costs onto their suppliers. These sorts of pressures are bad for producers and bad for consumers - ultimately they can lead to lower quality goods, less choice and less innovation.

"The Adjudicator will be able to step in to prevent unfair practices continuing - ensuring a fair deal for producers and safeguarding the consumer interest."

Minister for Food and Farming, Jim Paice said, “The businesses that grow and produce our food are worth more than £80 billion to the economy and employ 3.6 million people – and they need a fair market. The new adjudicator will help to strike the right balance between farmers and food producers getting a fair deal, and supermarkets ensuring their customers can get the high-quality British food they want at a price they can afford.”

These proposals to establish the GCA as set out in consultation response will require primary legislation. The Department for Business will be seeking Parliamentary Business and Legislation Committee approval to publish a draft Bill later this year with the intention of bringing forward a Bill in the second Session.

Reacting to today’s announcement, the British Retail Consortium (BRC) said the new quango is unjustified and against the spirit of better regulation. BRC Director General Stephen Robertson said, “An ‘adjudicator’ will just add unnecessary costs. We fail to see why principles of better regulation don’t apply to grocery retailing, particularly when the additional costs will ultimately affect the prices customers pay.

“The existing code of practice was strengthened and extended as recently as February. It now applies to all the top ten biggest grocery retailers. It gives suppliers more protection and a new right to independent arbitration to resolve disputes. Its effectiveness over several years should be assessed before any decision to introduce further regulation.

“We already have the most regulated grocery sector in the world. The Code the ‘adjudicator’ would administer only applies to suppliers who have a contractual relationship with retailers but there’s a real danger the new body will generate lots of correspondence from suppliers who aren’t covered. Administering those will still clock up costs.

“Granting complainants anonymity offends against natural justice and would make it very difficult for retailers to respond to cases. With an independent budget and no direct reporting line to the Office of Fair Trading or Government this is a quango. Quango’s cost. This will reduce the efficiency of the supply chain and customers will pay the price.

“Let’s not forget the key concern for the Competition Commission was consumers not suppliers. I don’t see anything in this proposal that will help them.”

However, the Food and Drink Federation (FDF) was more supportive of the move. Melanie Leech, Director General of the FDF said, “We welcome the commitment from the Government to set up a Groceries Code Adjudicator to oversee the Groceries Supply Code of Practice. The pragmatic proposals outlined today will ensure that there is an effective, low-cost monitoring and enforcement body in place. We believe the Adjudicator will be of particular help for smaller businesses, ensuring that the food chain operates fairly and in the best interests of consumers and would urge the Government to make it a reality as quickly as possible.”

Meanwhile, one unnamed executive of a big grocery chain was quoted by the Financial Times as saying that the industry had been privately preparing for some sort of regulatory scrutiny. “It’s what we were expecting – only it is an adjudicator rather than an ombudsman, which suggests that it is a watered-down role.”

More Details: http://www.kamcity.com/namnews/asp/newsarticle.asp?newsid=55162