Fairness watchdog could fine stores for abuses

The country’s largest supermarkets could be fined if they fail to deal with farmers and suppliers fairly, it has been announced.

A draft Bill was published yesterday to appoint a Groceries Adjudicator who would be allowed to investigate supermarkets over alleged abuses of power.

The plans were published in the Government’s Groceries Code Adjudicator Bill and follows years of recommendations that such a figure be created to police the industry to ensure a fair deal for farmers.

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The primary role of the adjudicator will be to uphold the Groceries Supply Code of Practice which came into operation in February last year and to arbitrate between retailers and suppliers over disputes.

It raised the prospect of fines for supermarkets shown to breach this code but stopped short of suggesting how much these fines would be, saying such a power could only be added by the Secretary of State for Business.

Ministers said the adjudicator would cost around £800,000 a year to run and would be funded by a levy on the 10 largest food retailers in the country.

The Bill also stipulates that the adjudicator would be able to investigate retailers whose turnover exceeds £1bn and that complaints can be made anonymously to allow farmers and producers to come forward without fear of losing contracts.

Under the draft legislation supermarkets found guilty of unfair practices would also have to meet the cost of any investigation.

Farming Minister Jim Paice said: “This Bill will give teeth to the code of practice, will mean that bad practice can be stamped out and that suppliers can raise legitimate disputes confidentially, and without the fear that they’ll be penalised for speaking up through lost business.”

The announcement drew fire from major retailers who predicted the adjudicator would achieve nothing and mean increased food prices for consumers.

However Consumer Minister Edward Davey said: “Preventing unfair practices and increasing certainty for suppliers will safeguard consumer interests, as large retailers won’t be able to take advantage of their position of power, as set out in the code.”

In 2009 the Competition Commission published results of a two year investigation into the supermarket industry which concluded that an adjudicator would mean fairer prices for farmers and consumers.

National Farmers’ Union president Peter Kendall said: “Parliament must now scrutinise the text in good time.

“For our part, we will examine the details closely to ensure the adjudicator can do its job effectively – by having the teeth to enforce the supply code of practice, by protecting the anonymity of those wishing to complain and to provide an appropriate and effective deterrent through proper penalties.

“Now is the time for the whole grocery supply chain – producers, manufacturers and retailers – to put any past differences to one side and work together to ensure that the adjudicator will be fit for purpose. Then we can start to see better functioning supply chains which reward all players more fairly.”

However the British Retail Consortium attacked the draft Bill.

Director Andrew Opie said: “Food prices are already under considerable pressure from rising global commodity costs and climbing fuel and utility prices. Retailers are doing their best to cushion customers from the full impact of these increases. The extra costs of dealing with a new administrative body will make it even harder to keep price rises away from shop shelves.”