Competition Commision publishes grocery proposals

The Competition Commission (CC) has published for consultation proposals designed to remedy its competition findings in UK groceries retailing.

In its provisional findings report last October, the CC concluded that action is needed to improve competition in a number of local markets and to address relationships between retailers and their suppliers.

The new proposals include a recommendation for the inclusion of a 'competition test' in planing decisions on large stores, the creation of a new and extended Groceries Supply Code of Practice (GSCOP) and the establishment of an independent ombudsman to oversee and enforce the code.

The 'competition test' would be introduced when local planning authorities are assessing planning applications for new large supermarkets. The Office of Fair Trading (OFT) would act as a statutory consultee to the local planning authority to carry out the test.

The new GSCOP would replace the existing Supermarkets Code of Practice (SCOP) and would be extended to all grocery retailers in the UK with a turnover greater than £1bn. The new Code would prohibit retrospective changes to agreed terms of supply and require retailers to make further improvements to their dealings with suppliers through the appointment of an in-house code compliance officer, keeping better records of contracts with suppliers and automatic notification to suppliers of contractual terms and their right to complain and seek arbitration of disputes.

The ombudsman would arbitrate on disputes under the GSCOP, with the power to gather information following complaints from suppliers and primary producers and pro-actively investigate breaches of the GSCOP.

British Retail Consortium chief, Stephen Roberston, rejected the proposals to strengthen the supplier code and introduce an ombudsman, claiming that the Commission found no evidence of a systematic failure in supermarkets' relationships with suppliers.

"The Commission searched hard but found no evidence of systematic failure in supermarkets' relationships with suppliers. It's not clear what need there is for another bureaucratic layer," he said.

"Abuse has not been found because supermarket/supplier relationships are overwhelmingly mutually beneficial and built on trust. Creating new channels for complaint would do nothing but pile on extra costs which have to be met from somewhere."

Welsh Rural Affairs minister, Elin Jones, who wrote a letter to the CC in December calling for the a figure to regulate supermarkets, welcomed the recommendation for a retailer ombudsman.

"I called for this last year as I believe having a good relationship between retailers and suppliers in the grocery market is important. I feel it will be of benefit to all, suppliers and retailers, for there to be an independent body to monitor and regulate the sector," she said.

"An Ombudsman will have a vital role to play in highlighting existing good practice and disseminating it."

Other recommendations in the report include: a requirement for grocery retailers to release existing restrictive land covenants, a ban on the imposition of future covenants, a requirement for grocery retailers to lift exclusivity arrangements that have been in place for more than five years and an amendment to the Land Agreements Exclusion Order so that agreements which restrict grocery retailing should no longer benefit from exclusion from the Competition Act.

The CC would like to hear from all interested parties about the provisional decision on remedies by Friday March 7 2008. To submit evidence, please email: Groceries @cc.gsi.gov.uk or write to:

The Inquiry Secretary

(Groceries Market Investigation)

Competition Commission

Victoria House

Southampton Row