Supermarket watchdog called for...

The Office of Fair Trading's (OFT) long awaited review of the Supermarkets Code of Practice, published today [1] is a blow to farmers and other suppliers hoping for action to give them greater protection from the bully behaviour of the big supermarkets.

The review took a year but despite its conclusions that the current Supermarket Code of Practice is not working the only action to be taken by the OFT is a further investigation.

The review is a huge disappointment to an alliance of 14 environmental, consumer and farming organizations [2], including Friends of the Earth, FARM, and the National Federation of Women's Institutes and the British Independent Fruit Growers Association who have called for the Code to be scrapped and replaced by a much stronger statutory Code and independent supermarket Watchdog.

In its report the OFT says that "there may have been no change in supplier-supermarket relationships" as a result of the Code and even Tesco and Sainsbury's say that the Code has not made a difference to their relationships with suppliers. Some suppliers say that conditions have got worse since the Code was introduced.

Sandra Bell, food and farming campaigner for Friends of the Earth said

"The OFT's review confirms what farmers and other suppliers already knew, that the Code of Practice is useless. The bully behaviour of the biggest supermarkets is continuing unabated to the detriment of farmers and consumers. Its time that Tony Blair finally lived up to his promise to release farmers from the supermarket arm lock by creating an independent Watchdog to ensure fair trading practices".

The Code of Practice was introduced in 2002 after the Competition Commission found large supermarkets operating against public interest, reducing the choice and quality of goods. In today's review the OFT concludes that "the code is not working effectively " but has failed to put forward any recommendations. Instead it has proposed further investigation and an audit of the supermarket's records.

Although it is welcome that the OFT will be using its powers to investigate the supermarkets records Friends of the Earth is warning that this will fail to uncover the full truth about the way the retailers bully suppliers because so much business is done verbally. Nor will the audit be able to pick up on the climate of fear which clearly exists amongst suppliers dealing with the biggest supermarkets.

The OFT's lack of action or firm recommendations to the Government will be a huge blow to the suppliers that participated in the review. The overwhelming message from respondents was that the Code has not made any difference to the way that the supermarkets treat them.

The OFT acknowledges that suppliers are afraid to complain about the activities of the supermarkets so its suggestion that suppliers should bring forward more complaints is extremely niave. No official complaints have been brought forward, and this is not surprising when the supplier must complain to the supermarkets in the first instance. Also niave is the OFT's suggestion that definitions of "reasonableness" would be refined by the mediation process. The vague wording of the Code and in particular the use of the word "reasonable" throughout is another reason for the lack of complaints. As one supplier put it " If you are a small supplier negotiating with a retailer who has more than 15% of the market you can bet its not you who defines what is "reasonable". [3]

The OFT has failed to recommend the idea of an independent retail regulator. But Friends of the Earth says that the complete failure of the mediation system backs the need for an independent Watchdog to whom suppliers could take their complaints. The Watchdog would also need to pro-actively go out and talk to suppliers in the UK and overseas about relationships with the supermarkets.

The failure of the Code is a symptom of the huge market power wielded by the biggest supermarkets. About three quarters of the grocery market is controlled by just five companies. The Government's go ahead for Safeway and Morrison's to merge will tip the power imbalance further in favour of the retail giants. Yet the OFT seems happy to allow the supermarkets to continue to be in charge of the process of governing their own behaviour.

Robin Maynard, National Co-ordinator of FARM said :

"With the chair of Sainsbury's Sir Peter Davis prophesying an even fierce price war between the remaining four major retailers, it doesn't take a genius to see that their suppliers are going to get squeezed even harder. That means the primary producers, farmers face a very bleak future. "

"One balancing factor could have been a statutory code providing some legal and regulatory protection against the unreasonable demands on producers, which ultimately all stem from the supermarkets. The Office of Fair Trading has failed in its duty and should be renamed the Office of Feeble Timidity."