Supermarket Code in the firing line again
which British retailers do business, has been criticised once again
by a number of consumer and producer organisations for failing to
do enough to curb the power of the supermarket groups.
An alliance of organisations as diverse as Friends of the Earth, the National Federation of Women's Institutes, the Soil Association and the Small and Family Farms Alliance, has today called on the UK government to take a tougher stance against the retailers when it completes its review of the Code later this year.
The Office of Fair Trading announced a review of the Code of Practice in February 2003 and was initially expected to report by the summer of that same year. But a decision was taken to wait until the Competition Commission had ruled on which chains could and could not bid for the UK's fourth largest supermarket operator, Safeway, before completing the review of the Code. The Commission's decision was made in September - giving Morrisons the sole right to bid for Safeway - and the OFT's review is now nearing completion.
But according to the alliance, the government needs to take urgent action whatever the outcome of the OFT's review.
One of the more prominent and vociferous alliance members, Friends of the Earth, said it expected 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, and FoE has done little but complain about its inadequacies ever since, in particular with regard to its failure to improve the lot of farmers and other small suppliers.
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.
For example, a survey carried out in March last year by FoE showed that UK farmers have continued to suffer from 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."
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 [Tesco, Asda, Sainsbury, Safeway]. 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"
FoE said that part of the problem with the Code was that the retailers had had too much influence over the way it was worded, inserting terms such as 'reasonable behaviour' which were hard to define, in particular for small suppliers 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, and is also calling for an independent watchdog to "stop supermarkets abusing their powerful market position by having the power to initiate legal action against companies that breach the Code".
The current system means that suppliers are only able to complain to the supermarket in question about the way they are treated, according to FoE, which said that its research showed that many farmers were afraid to this because of a fear of delisting.
The alliance is not the only group calling for an independent watchdog. The Policy Commission on the Future of Farming and Food chaired by Sir Don Curry also recommended, in 2002, that the current dispute resolution process should be replaced by an independent mediation service, according to FoE.
The retailers have repeatedly stressed their credentials as supporters of British farmers and food producers.
Sir Terry Leahy, head of the UK's biggest supermarket chain Tesco, responded to the FoE's criticisms last year by saying that supermarkets were totally dependent on the goodwill of their customers that, now more than ever, they were careful to ensure that whatever they did would be well received by their customers.
This means bigger product ranges, longer opening hours, more convenient products and store locations and low prices, according to Leahy. But it is consumer demand for low prices in particular which forces Tesco and its rivals to be rigorous in their dealings with suppliers, not a desire to create massive profits at suppliers' expense.
Consumer pressure also means that Tesco and other stores stock British goods, even though they could be sourced more cheaply from abroad, he said. "So it is certainly not in the interests of Tesco, or any major food retailer, to see farmers and suppliers suffer. We, the supermarkets, need them to flourish, so they can invest in their businesses and help us react to consumers' changing demands."
