Pressure builds for supermarket code review

Calls to toughen up the Supermarket Code of Practice (SCoP) were growing after the Competition Commission published provisional findings of its investigation into the grocery supply chain on October 31.

In its report, the Commission said it was concerned about retrospective payments to suppliers and sudden changes to supply agreements by retailers.

A spokesman for Greencore said: “It does seem appropriate to have a review of the Code against best practice, particularly at a time when the whole industry is facing unprecedented raw material cost pressures.”

The Food and Drink Federation said in a statement: “We are keeping an open mind to the changes the Commission may or may not make to the SCoP as the retail market has changed significantly since the Code was originally drafted.”

NFU president Peter Kendall said: “In the light of the practices exposed by the Competition Commission, there is a clear need for a much tighter code of practice to govern supermarkets’ relationships with suppliers and for that code to be enforced, either by the Office of Fair Trading or by some other independent third party.”

Duncan Swift, head of the food and agribusiness recovery group at financial and business advisor Grant Thornton UK, said: “Urgent action is needed through a radical reform of this ineffective Code and the introduction of a supermarket ombudsman.”

In its report the Commission said: “Of the 380 concerns raised with us by suppliers and supplier associations, nearly half related to the transfer of risks or unexpected costs from grocery retailers to suppliers and one third related to requirements for retrospective payments or other adjustments to previously agreed supply arrangements.”

Suppliers objected to other practices including payment delays beyond agreed times, excessive payments to grocery retailers for customer complaints and demand for added packaging and distribution services and last minute price reductions.

The Commission said it expected supplier innovation or investment to be reduced if the practices mentioned continued at present levels. The Commission itself said it was considering changing the Supermarket Code of Practice (SCoP) and introducing a body to enforce it among the possible market remedies.

It said possible solutions included changing “the institutional arrangements for the monitoring and enforcement of the SCoP” as well as broadening it to include more retailers and changing the nature of its restrictions.

The Commission said it found no evidence of price collusion between retailers and suppliers and no unfair barriers to market entry for small suppliers.

It said it found no particular anti-competitive practices in the provision of own label goods. While it found evidence of below cost selling in dried goods and alcohol, it did not believe this damaged competition in the grocery market. And it said it had found no evidence of prevailing abuse of buying power among the retailers, to the detriment of competition.

The Commission has given interested parties until the end of November to comment on the provisional findings.