Talking shop: UK makes slow progress on grocery adjudicator
Despite being recommended by an Office of Fair Trading inquiry in 2008, the UK is still awaiting the establishment of an ombudsman to police the relationship between supermarket chains and their suppliers. The Government has now introduced a draft bill that would see the creation of the Groceries Code Adjudicator but campaigners say it is dragging its feet and being influenced by retail industry lobbying. Ben Cooper reports.
The long-running debate over supermarket power in the UK is being played out again as Parliament considers the Draft Groceries Code Adjudicator Bill. This would see the creation of an adjudicator to oversee the Groceries Supply Code of Practice (GSCOP) which came into force last year.
Two tests of supermarket power are effectively taking place. The first relates to the central question over whether the adjudicator is actually necessary. The second is whether these powerful companies can prevent or delay the introduction of the adjudicator or influence how it may operate.
Under the terms of the draft bill, the adjudicator would arbitrate disputes between retailers and their direct suppliers; investigate GSCOP breaches by retailers and where it finds there to have been a breach decide whether to make recommendations to the retailer, require it to publish information about the investigation or (subject to the Secretary of State adding the power to do so) impose a fine; report on when and how investigations will proceed and how its powers will be used as well as submitting an annual report; and recommend changes to the Groceries Code.
It would apply to all grocery retailers in the UK with a turnover in excess of GBP1bn. The only one of the ten retailers which fall into this category to support the move has been Waitrose.
On the first question, the retailers say the GSCOP is working well. GSCOP has been in place since February last year, says Richard Dodd, spokesperson for the British Retail Consortium (BRC) which represents major retailers, and since then "not one case has gone to independent arbitration". Dodd says the lack of complaints underlines that supermarkets have "perfectly healthy business relationships" with their suppliers.
Retailers have called for a review of the effectiveness of GSCOP to be conducted before an adjudicator is created. Supplier groups say the adjudicator was itself a recommendation of an extensive inquiry.
Underlining the intractability of the debate, suppliers cite the lack of GSCOP complaints to support their argument, suggesting that it is down to a "climate of fear" among suppliers. "Suppliers are still feeling they can't use it because there isn't that enforcement body there to back them up," says Helen Rimmer, food campaigner at Friends of the Earth.
Dodd says administration of the adjudicator would "add extra costs and put prices up". Proponents of the adjudicator have suggested the costs retailers would have to bear are minimal in comparison with the scale of these businesses.
Given that there is cross-party support for the adjudicator - it was in all three parties' manifestoes - and it has been introduced as a bill, albeit a draft one, all sides of the debate are now expecting it to come into force at some point, though supplier representatives have been critical at the possible time it might take.
Rimmer says the Government has already "bowed to supermarket pressure" by submitting it only as a draft bill. "It is very disappointing that they've chosen not to prioritise this," Rimmer tells just-food.
As it stands, the bill could be presented in the session from March 2012 to March 2013 and could therefore be enacted by the end of 2013 or even the beginning of 2014.
"There is scope to bring that forward if the Government were minded to prioritise this but at the moment they don't seem to be particularly persuaded to get a move on," says NFU government affairs advisor Nick von Westenholz.
However, while the UK may be moving slowly towards the establishment of an adjudicator, exactly what its powers will be are by no means decided.
The degree to which it remains in its current form will go some way to answering the second test relating to the supermarkets' political power. Reports last weekend suggested that retail lobbying may succeed in having the bill derailed but representatives from both sides believe the reports are overstating the case.
Rimmer does not believe the issue will be completely sidelined, while Dodd says: "There seems to be no particular indication that we're getting that the Government is suddenly going to abandon this plan for an adjudicator."
Von Westenholz said he thought the reports were rather "sensational". He adds: "The noises coming out of the government are that they want to do it" but remains concerned that industry lobbying may result in shaping the adjudicator's remit so it "isn't really able to do the job that it's required to do".
In response to the suggestion that the retail sector has been indulging in heavyweight lobbying, Dodd pointed out that all sides had given evidence to the Business, Innovation and Skills (BIS) Select Committee. "Everyone involved has had an equal opportunity to put their case forward. We've put our case forward as you would expect us to and so have they, as they are perfectly entitled to. Everybody has been doing their jobs and expressing their views and providing their evidence."
The BIS Select Committee is yet to publish its report but the Environment, Food and Rural Affairs Committee (Efra) has already backed the idea of having the adjudicator, which von Westenholz described as "very positive". However, it is the BIS Committee's report which is more crucial as it is the official scrutinising committee for the draft bill.
The Efra committee recommended that the bill be strengthened to allow trade organisations to make complaints on behalf of farmers and food producers, and that the adjudicator should have the power to impose financial penalties.
These are recommendations that the NFU itself has made. Von Westenholz says it is important that the adjudicator be allowed to take evidence from any credible source. He says the adjudicator needs to investigate breaches of the code "simply where it has reasonable grounds".
The adjudicator could only consider evidence from an NGO or a trade association if that organisation places the information in the public domain, which Von Westenholz says, "we wouldn't want to do if we wanted to protect the identity of the company that had suffered the breach, and it also wouldn't be able to take evidence for example from a whistleblower within a retailer".
For its part, the retailers are concerned about the adjudicator being given the power to impose fines, though this would be contingent on secondary legislation. They also concerned about the adjudicator being able to consider information from indirect suppliers in investigations.
Paul Kelly, corporate affairs director at Asda, told the BIS Select Committee that this risks "swamping" the adjudicator and that GSCOP was intended to deal with the primary relationship between supermarkets and their direct suppliers.
However, von Westenholz believes this focus on the contractual relationship misses the point. "The fact that there is a contractual relationship is largely irrelevant. If somebody has evidence of a breach, that is evidence of a breach. This is not a contractual legal remedy here. This is a whole different regulatory framework that is being set up."
The BIS Select Committee report may come as early as next week or may be delayed until after the forthcoming parliamentary recess. Whenever it comes it should give a reasonable steer on which way the wind is blowing on some of these questions of detail, and whether retail lobbying may win any concessions. However, with broad cross-party support, when it is submitted as an official bill it seems likely that, five or six years after first being recommended by the Competition Commission, the supermarket adjudicator will finally become a reality.
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