The UK retail industry has been left ruffled by the findings of the Competition Commission, with the multiples decrying the proposed creation of an ombudsman to oversee the treatment of suppliers and the independents condemning the UK watchdog’s “failure” to safeguard diversity.
The CC has proposed the creation of an ombudsman to police the relationship between suppliers and retailers.
The new body will be responsible for overseeing the implementation of a stronger code of practice. It will investigate complaints made by suppliers of supermarkets abusing their power and it will have the authority to “levy significant financial penalties” on supermarket groups if they fail to comply with its findings.
Significantly for suppliers, complaints will also be kept anonymous.
The scheme has drawn widespread criticism from the giants of the UK’s retail scene.
The British Retail Consortium, which represents many of the larger retailers, told just-food today (30 April) that its primary issue with the body is that it is unnecessary.
“There is no need for a new costly bureaucratic regime to govern the relationship between suppliers and retailers,” a BRC spokesperson commented. “There is no evidence of failings in the relationship. This is a false impression created by various campaign groups. The CC has exhaustively searched for evidence to support these accusations and found none.”
The BRC expressed concern that the ombudsman would, in fact, be counter productive because it could potentially restrict negotiations between suppliers and retailers. These “robust negotiations” are a natural part of business and benefit the consumer, the BRC maintained.
Tesco CEO Sir Terry Leahy echoed this sentiment. Responding to the CC findings Sir Terry said there was a danger that the establishment of the ombudsman would not benefit consumers.
“We are not sure that the main recommendations will improve the life of the British consumer. We welcome the broadening of the supplier code, but we share the concerns of panel member Professor Bruce Lyons that an ombudsman would be counter-productive and would reduce the benefits of competition,” Sir Terry said.
Retailers will have to foot the ongoing bill for establishing and running the body and, unsurprisingly perhaps, this has also been a bone of contention.
Asda chief executive Andy Bond warned that the cost of setting up and running the ombudsman could be passed along to consumers.
“The commission’s proposals on the new code and an ombudsman could cost the industry hundreds of millions, leading to higher prices for customers which will hit families hard at a time when they are already feeling the pinch,” Bond said.
Meanwhile, at the other end of the spectrum, smaller independent retailers are also unhappy with the CC’s findings.
The Association of Convenience Stores, which represents over 33,000 local shops, has expressed dissatisfaction with the report.
ACS chief executive James Lowman said that the CC had failed independent retailers. “After a two year investigation, and despite the weight of evidence showing the extent of competition problems in the market, this inquiry has failed to support choice and diversity in the grocery market,” he said.
“The overriding failing of this inquiry is that the Commission views competition in the grocery market as competition between the big four retailers. This approach ignores the critical need for a variety of retailers and supply chains. It is out of kilter with consumer trends towards more local shopping, and neglects the needs of many groups of consumers whose requirements are not properly met by the big four superstores,” Lowman concluded.
The ACS claimed that over the course of its inquiry the CC uncovered evidence of the anti-competitive effects of supermarket buyer power but failed to act on this. The Association accused the CC of ignoring below cost selling and aggressive pricing behaviour.