Archived press release

Alliance calls for urgent action to end supermarket abuse

21 February 2005

Campaigners are urging the Department of Trade and Industry (DTI) to urgently act on supermarket abuses of power, as the Office of Fair Trading prepares to publish the results of its audit on how the stores comply with the Supermarket Code of Practice. The call comes as analysts predict yet greater concentration of supermarket power in the year ahead.

The `Breaking the Armlock Alliance, which includes environment, development, consumer and farming groups has written to Gerry Sutcliffe MP, DTI Minister, urging him to act on the Code without further delay [1].

The Alliance says that enough evidence of unfair supermarket practices already exists to demonstrate that the Code in its current form, is not working (Competition Commission Report in 2000 listed 52 kinds). The OFT's 2004 review of the Supermarket Code of Practice found that 80 to 85 per cent of respondents claimed the Code has failed to bring about any change in supermarkets' behaviour.

The Alliance is calling for an independent and confidential watchdog, which will allow suppliers to bring forward complaints in confidence. Under the current system suppliers are unlikely to report abuses as complaints must go through the retailer, putting their relationship with the retailer at risk.

Friends of the Earth Senior Food Campaigner Vicki Hird said:

"Making the Code stronger to give suppliers more protection is not rocket science - we've written to the OFT and Gerry Sutcliffe with suggestions of how the code can be strengthened. By putting the Code on a statutory footing, the Government can strengthen it without needing primary legislation. Enough farmers have been put out of business by the current system - they should just get on with it".

The Alliance believes regulation is the only approach that will to stop supermarket abuse of power. Evidence shows that even the most robust voluntary initiatives with supermarkets do not work. Farmer, development, environmental and consumer organizations across the UK and globally are now calling on their governments to introduce regulation to protect suppliers, consumers and independent retailers from increasing supermarket power [2].

The Code is also failing to protect overseas suppliers, the Alliance says. The UK Government promotes market access, but when developing country producers start to supply the UK supermarkets they are often forced to accept prices below costs of production, cover the cost of discounts, and make 'donations' at the whim of the supermarkets. This makes it impossible to pay a living wage on some banana plantations supplying the British market, for example.

In the UK, the Alliance says that farms and farm workers are being lost at an alarming rate, with an average of 25 farmers and farm workers leaving farming every day. Farmers' share of the food pound has dropped to 7.5p from 50p fifty years ago.

In its letter, the Alliance points to the dramatic change in the market situation in the three years since the Code was introduced (March 2002). A number of major takeovers in the convenience store market have lead to even more concentration in the market and an increasing imbalance of power in the food chain. Tesco is expected to hold 30% of the UK groceries market by June 2005 [3], and to lead the convenience store market by the year end.

Several members of the Alliance believe a market study on the impact of the changes on suppliers, consumers, and high street retail diversity, is now essential [4] and have written to the OFT to request this new analysis. The OFT is expected to announce its decision when they release their findings on the Code.

Notes

1. Friends of the Earth is part of an alliance of 15 organisations calling for a strict Statutory Code of Practice to protect supermarket suppliers and an independent Retail Regulator to enforce it. The new Code would replace the existing weak and voluntary code introduced in 2002. The Office of Fair Trading is due to report on its audit of supermarkets compliance with the code in late February/March and a response from DTI is expected soon after. The `Breaking the Armlock' alliance says that it is already clear the existing code is not working and it must be changed without further delay. See www.breakingthearmlock.com

The alliance includes Banana Link, British Independent Fruit Growers Association, farm, Farmers for Action, Farmers' Link, Farmers' Union of Wales, Friends of the Earth, Grassroots Action on Food and Farming, International Institute for Environment and Development, National Federation of Women's Institutes, New Economics Foundation, Pesticide Action Network UK, Soil Association, Small and Family Farms Alliance and WyeCycle

2. See for instance www.racetothetop.org.uk and www.corporatewatch.org.uk/?lid=705 . Also see Homeworking in Britain: Flexible working or exploited labour?, National Group on Homeworking, 2004 and `Trading away our rights; women working in global supply chains', Oxfam 2004

3. Friends of the Earth press release 17th Jan - Tesco's Growth: Every Little Hurts

4. Friends of the Earth also wants a moratorium on any further takeover of other chains by Tesco. Over the last two years Tesco has been allowed to take over the T&S and Adminstore convenience store chains with no investigation by the competition authorities. It is growing its market power in this way and further reducing consumer choice. Along with the Association of Convenience Stores, the National Federation of Women's Institutes and FARM, Friends of the Earth has called for a new investigation into new trends in the grocery market including the impacts of the big four taking over convenience store chains.

New national planning policy guidance about town centres (Planning Policy Statement 6) is also due out early this year. The draft version of the statement alarmed Friends of the Earth and smaller retailers by its inclusion of a policy encouraging the provision of large format stores on the edge of town centres - despite strong evidence that such stores take away trade from existing town centre shops. Friends of the Earth is calling on the Office of the Deputy Prime Minister to remove this clear bias in favour of big supermarkets from the statement and to encourage more diverse retail provision instead. Examples of the negative impacts of new Tesco stores are available from Friends of the Earth or see "Why the new Planning Policy Statement 6 could damage town centres". (PDF)

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Published by Friends of the Earth Trust