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Supermarket watchdog needed to protect consumers and farmers
22 January 2004
The Alliance: Banana Link, British Independent Fruit Growers Association, FARM, Farmers for Action, Farmers Link, Friends of the Earth, Grassroots Action for Food and Farming, IIED, National Federation of Women's Institutes, New Economics Foundation, Pesticide Action Network-UK, Soil Association, Small and Family Farms Alliance, Wyecycle.
The alliance is calling on the Government to take urgent action, whatever the outcome of the OFT's review [1]. Friends of the Earth expects the OFT's review to contain some criticism of the existing Code of Practice but to fall short of recommending an independent retail watchdog.
The Code was introduced in 2002 after the Competition Commission found large supermarkets operating against public interest, reducing the choice and quality of goods. Since then evidence from farmers and other suppliers has shown it to be ineffective and the Competition Commission recently concluded that it has made little if any difference to trading practices [2].
The Alliance argues there is strong evidence that the existing Code makes it difficult for both UK and international suppliers to invest in environmental or animal welfare standards or improve working conditions because supermarkets are passing unreasonable costs back down the supply chain.
A recent survey (2003) by Friends of the Earth [3] revealed UK farmers are still experiencing the unfair practices the Competition Commission sought to eliminate, including paying rebates on agreed prices, additional costs due to supermarket changes in demand and covering the cost of supermarkets' unsold products or waste - even when the product is not faulty. The NFU has also been critical of the Code and Derek Meade, one of the candidates for NFU presidency when Ben Gill steps down in February, has recently endorsed the need for a clear statutory code of practice and watchdog.
Sandra Bell, Food and Farming Campaigner for Friends of the Earth said:
"It is clear that the Code of Practice has failed to protect farmers and other suppliers from the bully behaviour of the big four supermarkets. It is impossible to see how the OFT can come to any other conclusion in its forthcoming review. The government must now act urgently to draw up a new Code and impose it on the supermarkets. There must also be an independent watchdog with the power to protect suppliers and to ensure consumer choice and quality of goods is not being damaged in what has become a very concentrated grocery market"The biggest four supermarkets are legally bound by the existing Code but they were involved in its drafting resulting in weasel worded references to "reasonable" behaviour. Small suppliers in particular are not in a strong position to define what is "reasonable" when negotiating with retailers with a large share of the market. The Alliance wants the new Code to prohibit particular practices and for the Code to be imposed on the big four.
The Alliance believes that an independent watchdog would stop supermarkets abusing their powerful market position by having the power to initiate legal action against companies that breach the Code, and would ensure that all investigations were made public.
Currently suppliers must complain to the supermarket. Friends of the Earth's survey revealed that a third of farmers surveyed who had experienced unfair treatment said `fear of delisting' was their reason for not complaining.
The Policy Commission on the Future of Farming and Food (the `Curry Report') also recommended that the current dispute resolution process should be replaced by an independent mediation service [4], and recently Sir Don Curry who chaired the Commission has expressed frustration at the delay of the OFT's review of the Code [5 ].
The Competition Commission found that the terms negotiated by the big supermarkets with their suppliers gave them a significant advantage over smaller stores and would lead to some small retailers going out of business. More than 13-thousand specialist stores, including butchers, bakers, fishmongers and newsagents, closed between 1997-2002 [6], leaving communities without accessible local shops and increasing the rise in emissions of climate-changing carbon-dioxide by forcing shoppers to drive longer distances to buy every-day essentials.
Notes
[1] The OFT announced its review of the Code of Practice in February 2003. It was expected to report by summer 2003 but then said that it would delay publication until after the Competition Commission had reported on the Safeway mergers which it did in September.
[2] The need for a new Code is backed by the Competition Commission's 2003 report on the Safeway merger: Competition Commission, 2003, Safeway plc and Asda Group Limited (owned by Wal-Mart Stores Inc); Wm Morrison Supermarkets PLC; J Sainsbury plc; and Tesco plc: A report on the mergers in contemplation
[3] www.foe.co.uk/resource/briefings/farmers_supermarket_code.pdf (PDF†)
[4] Policy Commission on the Future of Farming and Food, 2002, Farming and Food, a sustainable Future.
[5] The Guardian, `Supermarket price war threatens farmers', Monday January 19, 2004
[6] New Economics Foundation, 2003, Ghost Town Britain II Death on the High Street
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Published by Friends of the Earth Trust
Last modified: Jun 2008
