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No release for farmers from supermarket arm-lock. Leaked draft report shows new Code of Practice watered down.
13 March 2001
Friends of the Earth has obtained a draft of the Code of Practice for supermarkets which was prepared in response to recommendations in a Competition Commission report last year. It shows that moves to protect small suppliers and consumers from the damaging practices of large retailers have been significantly watered down, and offer little, if any, protection to farmers.
Earlier this month (1 March) Tony Blair told farmers that “the supermarkets have pretty much got an arm-lock on you people at the moment”, promising that it was “something we have got to sit down with them and work out”. FOE is now calling on the PM to ensure that this Code of Practice is scrapped and replaced with a code with real teeth.
The Competition Commission report concluded that the power exerted by major retailers enabled them to carry out practices against the public interest. It called for a Code of Practice to address these concerns. The report found evidence that the biggest supermarkets [Asda,Safeway, Sainsbury, Somerfield and Tesco] “adversely affect the competitiveness of some of their suppliers with the result that the suppliers are likely to invest less and spend less on new product development and innovation, leading to lower quality and less consumer choice”.
The Competition Commission report listed specific measures which should be included in a Code of Practice which it stressed must be binding on the larger supermarkets. Yet the draft Code obtained by FOE is littered with weasel words and caveats which will allow supermarkets to continue to dictate terms to their suppliers (see over page for key examples).
Adrian Bebb, Food Campaigner at Friends of the Earth said:
“This weasel-worded Code of Practice will not release farmers from the power of the supermarkets. It will simply give legitimacy to big retailers to carry on with business as usual. If this happens many small suppliers will to go to the wall. The new Code of Practice has to have teeth, with an independent arbiter to deal with any disputes.”
“The Government must look at long-term solutions to the problems faced by British farmers. If Mr Blair really wants to break the arm-lock of the supermarkets he must ensure that more of our food is produced and sold locally. Allowing our food supply to become more concentrated in the hands of a few big players is bad news for consumers and the environment.”
Examples of watering down of Code of Practice:
1. CompetitionCommission Report (all are direct quotes. Emphasis by FOE)
“Retailers should not request suppliers to contribute to retailers' costs of buyers visits, or any supplier contribution to the retailer's costs of artwork or packaging design, consumer or market research, or to the costs of store refurbishment or opening; or to provide hospitality”
Draft Code of Practice:
“A Supermarket shall not, directly or indirectly, unreasonably require a Supplier to make a Payment towards that Supermarket's cost of: buyers visits to new or prospective Suppliers;artwork or packaging design; consumer or market research; the opening or refurbishing of a store; or hospitality for that Supermarket's staff.”
2. Competition Commission Report
“Retailers... should not over-order goods at a promotional price; and they should not require suppliers predominantly to fund promotions”
Draft Code of Practice
“A Supermarket shall take due care when ordering products from a Supplier at a promotional wholesale price not to over-order and subsequently, without compensating that Supplier , sell at a higher, non promotional retail price.”
“A Supermarket shall not, directly or indirectly, unreasonably require a Supplier predominantly to fund the costs of any Promotion”.
3. Competition Commission Report
“Retailers should not seek any form of compensation for profits being less than expected,whether on a promotion or otherwise, or for product wastage”
“Retailers should compensate suppliers for costs caused through the retailers' forecasting errors”.
Draft Code of Practice:
“A supermarket shall not directly or indirectly require a Supplier to make a Payment to compensate that Supermarket when profits from the sale of that Suppliers' products are lower than expected by that Supermarket unless the basis of such Payment is agreed in writing between that Supermarket and that Supplier before the relevant supplies of that product are made.”
“A Supermarket shall fully compensate a Supplier for any cost incurred by that Supplier as a result of any forecasting error attributable to that Supermarket unless; that Supermarket has prepared these forecasts in good faith and with due care; or there is an agreement in writing between that Supermarket and that Supplier before the relevant supplies of the product are made that such compensation is not appropriate”
The draft Code of Practice does not define what is considered to be unreasonable, or what constitutes due care, or good faith leaving the interpretation in the hands of the supermarkets. According to this Code arbitration in the case of any dispute between supermarkets and suppliers would be left to a Mediator appointed by the Supermarkets. This Code offers little if any benefit to farmers and growers supplying supermarkets. And if more and more small and independent suppliers go out of business consumer choice will be eroded, as highlighted by the Competition Commission.
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Published by Friends of the Earth Trust
Last modified: Jul 2008
