Grocery industry 'adjudicator' to crack down on supermarket bullying of farmers and suppliers

Plans for an adjudicator to police a code of practice for the groceries industry have received a cautious welcome after years of pressure for the Government to intervene to ensure suppliers are treated fairly.

The watchdog – which will be based within the Office of Fair Trading – will be able to investigate complaints, with farmers or suppliers able to remain anonymous to protect them from any repercussions.

Initially the adjudicator, due to be in place by 2012, will be able to name and shame offenders but if supermarkets fail to take rulings seriously they could be fined.

The scheme, announced by Ministers yesterday, follows a report by the Competition Commission which called for a regulator to be set up, although retailers branded it "unnecessary" and claimed customers would be hit by higher prices.

Consumer Minister Ed Davey said: "We want to make sure that large retailers can't abuse their power by transferring excessive risks or unexpected costs onto their suppliers."

National Farmers' Union President Peter Kendall admitted he had concerns that initial powers only go as far as naming and shaming, and the Government had shied away from introducing an ombudsman independent of the Office of Fair Trading, but said: "I'm firmly convinced an adjudicator will benefit the whole supply chain – suppliers, retailers and most importantly consumers.

"I commend the new Government for following through on their election commitments and acting quickly to set out their plans."

He added: "Once in place, I do believe we will see fewer instances of flagrant bully-boy tactics used by the supermarkets over the years and reported to us by our members."

Ken Parsons, chief executive of the Rural Shops Alliance, said: "The government have recognised that there is a real need to ensure that large retailers treat their suppliers fairly and this announcement provides a good basis to make this happen."

Before the election, all three parties were committed to introducing a regulator, and the Government's proposals follow a consultation by Labour earlier this year.

But British Retail Consortium director general Stephen Robertson said: "An 'adjudicator' will just add unnecessary costs. We fail to see why principles of better regulation don't apply to grocery retailing, particularly when the additional costs will ultimately affect the prices customers pay.

"The existing code of practice was strengthened and extended as recently as February. It now applies to all the top 10 biggest grocery retailers. It gives suppliers more protection and a new right to independent arbitration."