Government bows to pressure with 'enforcer' to resolve supermarket disputes

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Ministers have accepted the Competition Commission's recommendation to install an ombudsman after failing to secure agreement from a majority of grocery retail giants on a voluntary scheme.

Supermarkets have warned that the move could lead to price rises but consumer affairs minister Kevin Brennan insisted the Government was wary of placing extra costs on businesses.

The Competition Commission made the recommendation in August last year following a lengthy investigation into the market.

Farmers' leaders have backed the call but retail chiefs warned it could spell the end of cheap food for shoppers.

The commission said supermarkets should foot the estimated 5 million cost of running the new watchdog.

In a written statement to Parliament, Mr Brennan said: "The Government wants to ensure that the Groceries Supply Code of Practice can be independently enforced and have the important power to hear anonymous complaints.

"However the Government is mindful of placing unnecessary costs on to business especially in a period of economic difficulty, which is why we plan to issue a consultation on how best to take matters forward."

Ministers have said they do not expect the watchdog to have a "significant impact" on the price of food in shops.

Environment Secretary Hilary Benn said: "The new ombudsman will help strike the right balance between farmers and food producers getting a fair deal, and supermarkets enabling consumers to get the high quality British food that they want, at an affordable price."

National Farmers' Union president Peter Kendall welcomed the decision to back an ombudsman, which he said was a victory for common sense and the consumer.

"Although the consultation period means that farmers and growers will still have to wait for the introduction of an ombudsman, we can at last see light at the end of the tunnel.

"It is vital that when the new strengthened code comes into force, we have a proactive and robust enforcement mechanism in place as soon as possible," he said.

"Ministers have taken the right decision and 2010 must be the year we begin to eradicate unfair dealing and protect investment and innovation in British agriculture for the benefit of consumers."

Earlier this month shadow environment secretary Nick Herbert pledged that a Conservative government would introduce a supermarket ombudsman to curb what he described as "the abuses of power" by major retailers.

Speaking at the Oxford Farming Conference, Mr Herbert said some aspects of the way supermarkets treat their suppliers could harm both the producers, who can be hit by unfair or unexpected costs, and consumers.

Without an ombudsman to police supermarkets, shoppers could suffer from lower-quality products, less choice and higher prices in the long run, he warned as he announced Tory backing for the enforcement body.

The Government has also decided to overturn rules which allow tenants such as supermarkets to reach agreements with retail park landlords preventing competitors from opening stores on the same sites.

The Conservatives described today's announcement as "too little, too late".

Shadow business minister Mark Prisk said: "Nearly two years after the Competition Commission recommended an ombudsman, the Government has finally come to a decision.

"But even now, ministers still can't decide when the ombudsman will be created, what powers it will have, and who will be in charge.

"Meanwhile, consumers, farmers, and small shops will continue to lose out."

Mr Herbert added: "This is a step forward but this belated announcement of further consultation is not the decisive action that consumers or the industry need.

"Conservatives are clear - we would establish a supermarket ombudsman to enforce the grocery supply code as a dedicated unit in the Office of Fair Trading to ensure a fair deal for producers and safeguard the consumer interest."

Liberal Democrat spokesman Tim Farron said: "For years, Labour and the Tories have twiddled their thumbs while huge supermarkets have pushed thousands of farmers to the brink.

"Their response has been totally inadequate and there are serious doubts over whether these belated proposals will properly regulate the industry.

"A code of practice that is not legally binding means that much will depend on how much power the ombudsman gets.

"We need a genuinely independent regulator to enforce a beefed-up code, instead of Labour and the Tories' half-baked attempts to buy off farmers in the run-up to a general election."

Mr Brennan hit back at the Conservatives' claim that today's announcement was "too little, too late", insisting that ministers wanted to put the right policy in place.

He said: "The public will be familiar with the Tories' overriding concern to make headlines at any cost.

"The Government's concern has been, and remains, getting this policy right in the interests of shoppers and businesses, especially during this difficult economic time."

But Friends of the Earth spokeswoman Helen Rimmer accused ministers of "dithering".

She said: "It's taken the Government two years to listen to the outcome of its own independent investigation and accept that a watchdog is needed to protect consumers and farmers - yet it still refuses to act on it.

"While the Government dithers, the big supermarkets continue to abuse their buyer power, putting the livelihoods of farmers and workers in the UK and overseas at risk.

"The Conservatives have spotted that we are facing a food security crisis, with thousands of farmers leaving the industry every year, and have committed to clamp down on the bullying behaviour of the supermarkets. Labour must go one better and urgently introduce a fully independent watchdog."

Federation of Small Businesses national chairman John Wright welcomed the announcement of a supermarkets ombudsman but called for it to be put in place as soon as possible.

He said: "The Government must ensure that the new ombudsman really has teeth to enforce the new code of practice, such as a legally-binding code that covers the relationship between supermarkets, suppliers and pricing.

"Only with such tough enforcement powers will the dominance of the big four supermarkets be finally challenged."