Debate over ombudsman rumbles on as grocery code comes into force

Debate over ombudsman rumbles on as grocery code comes into force

The dawn of a new code to oversee the UK grocery sector has met with a mixed reaction, with retailers claiming there is now no need for an ombudsman - and suppliers insisting it will not curb retailer “bully-boy” tactics.

The new code, which will be administered by the Office of Fair Trading, gives suppliers the right to appeal to an independent arbitrator in disputes and is designed to protect them from unexpected retrospective payments or being required to cover the cost of shrinkage.

The code, which came into force today (4 February), applies to the country's ten largest retailers, which will be required to demonstrate compliance to the OFT.

A spokesperson for the British Retail Consortium, the industry body representing UK retailers, told just-food that the additional costs retailers will incur will likely be “judged worthwhile” if it increases transparency and changes public perceptions of the relationship between retailers and suppliers.

“We think it will help demonstrate the strength of the relationship between food retailers and their suppliers. It should help overcome some of the myths. If it produces the results we expect, it will demonstrate that a costly ombudsman – that would skew the negotiating balance in favour of suppliers – is unnecessary,” the spokesperson said.

However, the chief of frozen food chain Iceland, Malcolm Walker, has spoken out against the code, claiming it is a “complete waste of time”.

“Nothing is going to change. It is the nature of life. Big suppliers bully small retailers and big retailers bully small suppliers. It is a fact of life,” Walker said in an interview with the Daily Telegraph.

Meanwhile, the National Farmers Union accused retailers of launching “pre-emptive strikes” this week, demanding retrospective payments and other changes to trading terms.

"Recent reports to me about retailer behaviour in the supply chain have demonstrated nothing but bully-boy tactics," said NFU president Peter Kendall.

"This week should have been marked by a sea change in grocery supply chain relationships with our farmer and grower members but instead in the past ten days I have heard how suppliers to major retailers have faced some of the most unreasonable demands for retrospective payments and changes to trading terms that we've ever seen,” Kendall said.

According to the NFU, this recent retail buyer behaviour demonstrates not only the need for the stronger code but also the establishment of an independent ombudsman.

It is understood that the UK government will launch a consultation on the establishment of an ombudsman to oversee the new code tomorrow.

However, the BRC has insisted that the launch of the consultation would be “premature”.

“It would be premature to be charging ahead with the introduction of a load more bureaucracy until the affects of the new code have been studied,” the spokesperson said.

The BRC has repeatedly insisted that the establishment of an ombudsman will result in increased prices for consumers as it would “tip the negotiating balance” in favour of suppliers – who are more likely to include multinational food corporations than small-scale businesses.