Farmers’ unions including the NFU, NFUS, UFU and NFU Cymru have offered their support to the Office of Fair Trading’s decision to refer the supermarket sector to the Competition Commission.
However, the farmers’ groups say that the remit of the CC enquiry should be expanded to include the relationship between suppliers and retailers.
In a report submitted to the OFT in response to a period of consultation ahead of the investigation, farming leaders strongly criticised the unchecked growth of supermarket power, suggesting that it is damaging the UK’s food supply chain.
“We have no doubt at all that a climate of fear and oppression exists amongst suppliers. The retailers have such a dominant position in the market place that a single retailer contract can determine whether or not a supplier stays in business. This creates an imbalance in negotiating strength which supermarkets can, and do, exploit,” the report said.
An NFU spokesperson told just-food that the farmers union believes suppliers are forced to accept unfair trading terms in order to secure long-term relationships with retailers. “Pressure from retailers is passed down the supply chain to a point where many of our members say that they are barely covering production costs,” the NFU suggested.
The NFU declined to give specific examples because, the spokesperson said, members were unwilling to be exposed for fear of reprisals from retailers. This, the farmers’ group says, is a consequence of the “climate of fear” that has come to dominate the UK food industry.
While acknowledging that the enquiry will primarily focus on the best interests of consumers, the report delivered to the OFT calls on the agency to adopt a long-term view of the consequences of supermarket price wars.
“On the face of it, retail price wars reduce prices and therefore can be argued are good for consumers. However, this approach is over-simplistic and is not sustainable. If a long-term view is taken, these price wars have the potential to be extremely damaging to consumers if they result in less choice and availability,” the submission states.
None of the big four supermarkets – Tesco, Asda, Sainsbury’s or Morrisons – could immediately comment on the report.