Tougher code of practice for UK supermarkets

27 February, 2009

The Competition Commission has published proposals to strengthen and extend the Groceries Supply Code of Practice (GSCOP).

The proposals are contained in a draft Order for consultation which can be viewed at the CC's website: www.competition-commission.org.uk. The CC will consider responses to the draft before finalizing it.

According to Peter Freeman, CC chairman and chairman of the Groceries Inquiry, "the new Code of Practice will be included in all retailers' contracts with their suppliers and provide a much clearer framework for these agreements."

The revised code would prohibit retrospective changes to terms and conditions, and limit the extent to which suppliers are required to pay for listings, promotions, inaccurate forecasts or customer complaints. It also sets out a clear procedure for resolving disputes and the requirement for retailers to provide reasonable notice and commercial justification before a supplier is de-listed.

"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," said Freeman.

"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."

Although the CC says that the Code will be "major improvement to relationships between retailers and suppliers", it accepts that an Ombudsman is needed to enforce it. The body says it will consult publicly on the issue over the next few months, although the creation of an ombudsman would require the agreement of retailers because the CC does not have the power to establish one itself.

The NFU welcomed the revised, more robust code, but stressed that "it will only work if it is accompanied by a robust and proactive enforcement mechanism", adding that the Ombudsman is the only such mechanism currently proposed.

The British Retail Consortium, on the other hand, said that the expanded code is further reason why an ombudsman is not needed.

Stephen Robertson, British Retail Consortium Director General, added: "An ombudsman is unjustifiable pandering to supplier pressure groups. It would simply be an expensive bureaucracy - unnecessarily piling on costs with only one result; increased shop prices.

"The voluntary supplier code has long been compulsory for the 'big four' supermarkets. A range of retailers are already following the code's provisions. Extending and strengthening the code makes an ombudsman even less necessary."





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