The Competition Commission (CC) has published a draft order for a strengthened and extended Groceries Supply Code of Practice (GSCOP).
The order follows the culmination of the CC’s inquiry into the UK groceries retail market last year, which concluded further measures were needed to address concerns about supplier-retailer relations. A public consultation will follow until March 30, during which all interested parties are invited to contribute.
A public consultation will also take place in the next two weeks on draft undertakings to establish an ombudsman to oversee and solve disputes under the code.
Authority to create an ombudsman is not possessed by the CC without the prior consent of retailers, which are known to vehemently oppose the concept. However, Food Manufacture has learned that more than 60 MPs have signed an Early Day Motion calling on the government to enforce legislation that would set up an ombudsman.
The motion has been tabled by Liberal Democrat MP Andrew George, whose office said the government should issue a clear ultimatum: “Set one up by this date or we will set one up for you.”
Amendments to the current GSCOP proposed by the CC would include incorporating the code into every retailer/supplier contract and automatic coverage of all retailers with annual turnover in excess of £1bn.
Other suggestions include prohibition of retrospective adjustments to terms and conditions of supply and specific arrangements for suppliers to be held liable for losses due to shrinkage. The CC is also proposing that retailers should be required to keep written records of all agreements with suppliers on supply terms and conditions.
“The code appears to be more robust, less open to interpretation and covers more retailers than the 2001 Code of Practice,” said the National Farmers’ Union (NFU) in a statement. “However, a strengthened code will only work if it is accompanied by a robust and proactive enforcement mechanism. The accompanying remedy of an ombudsman is the only such mechanism proposed currently.
“The NFU asks retailers to sign the undertakings to put in place such an office and, if they do not, then we would ask that the Department for Business, Enterprise and Regulatory Reform legislates to make this a reality.”
Peter Freeman, CC chairman and chairman of the Groceries Inquiry said: “We are not seeking to impose overly restrictive rules on commercial negotiations and it is not possible to set rules for every set of circumstances in supply agreements, given the variety of products, suppliers and situations.
“What we are introducing are clear standards so that, for example, those elements in a supply agreement that could be subject to uncertainty and change are discussed up front, so that both parties are agreed on how costs and payments will be allocated in those situations.”