Is the proposed new food supplier code unnecessary red tape?
Britain's two biggest supermarkets warned on Thursday that proposals to strengthen the code of practice governing relations between food retailers and suppliers would only increase the regulatory burden and costs on the sector. The revised code will encompass all retailers with turnovers of more than £1bn.
Tesco said the new plans would "add substantial costs to an industry that is generally working well for the consumer". Whilst Asda complained that the regulator was burdening retailers with "unnecessary red tape". It also expressed concern that the code would put further pressure on consumers. "The commission in its own report a year ago admitted the introduction of this code will lead to price increases for customers," said Asda. "In the middle of a recession this seems a perverse path to follow."
The comments came after the commission published a draft order for consultation over its plans to change the supplier code, which it promised to alter last year following a two-year investigation into the £125bn-a-year ($178bn) grocery market.
It intends to prevent retailers from retrospectively changing contract terms and to limit the extent to which suppliers are required to pay for listings, promotions, inaccurate forecasts or customer complaints. It would also make it harder for retailers to de-list suppliers through a tighter procedural code.
The regulator also told retailers that they would be required to keep all written records of agreements with suppliers, including small changes to terms.
Tesco said the commission's insistence that all minor changes to contracts would have to be agreed in writing was unnecessary and would have a knock-on effect of making Tesco send an additional 2m e-mails a year just to confirm minor changes.
But how will this be implemented? "A strengthened code will only work if it is accompanied by a robust and proactive enforcement mechanism," said a spokesman for the National Farmers' Union.
The commission said it will be consulting publicly in the next couple of weeks on the establishment of an ombudsman. However, the body does not have the power to establish an ombudsman itself and will have to gain agreement from the major retailers or refer the issue to the Government.
Since the major retailers are already complaining about the code, they are hardly likely to give their agreement. And if the matter is referred to the government, how long would it be before an enforcement officer was put in place?
Tesco said the new plans would "add substantial costs to an industry that is generally working well for the consumer". Whilst Asda complained that the regulator was burdening retailers with "unnecessary red tape". It also expressed concern that the code would put further pressure on consumers. "The commission in its own report a year ago admitted the introduction of this code will lead to price increases for customers," said Asda. "In the middle of a recession this seems a perverse path to follow."
The comments came after the commission published a draft order for consultation over its plans to change the supplier code, which it promised to alter last year following a two-year investigation into the £125bn-a-year ($178bn) grocery market.
It intends to prevent retailers from retrospectively changing contract terms and to limit the extent to which suppliers are required to pay for listings, promotions, inaccurate forecasts or customer complaints. It would also make it harder for retailers to de-list suppliers through a tighter procedural code.
The regulator also told retailers that they would be required to keep all written records of agreements with suppliers, including small changes to terms.
Tesco said the commission's insistence that all minor changes to contracts would have to be agreed in writing was unnecessary and would have a knock-on effect of making Tesco send an additional 2m e-mails a year just to confirm minor changes.
But how will this be implemented? "A strengthened code will only work if it is accompanied by a robust and proactive enforcement mechanism," said a spokesman for the National Farmers' Union.
The commission said it will be consulting publicly in the next couple of weeks on the establishment of an ombudsman. However, the body does not have the power to establish an ombudsman itself and will have to gain agreement from the major retailers or refer the issue to the Government.
Since the major retailers are already complaining about the code, they are hardly likely to give their agreement. And if the matter is referred to the government, how long would it be before an enforcement officer was put in place?
By Alan Kyle on 13 February 2011 07:28
By Ian Hunter on 13 February 2011 07:28
Firstly this is a blog that is shame faced biased towards the industrial food industry. Therefore, it supports the big players in the food market. As for an ombudsman the major supermarkets agreed to one over a year ago, but have worked to stop having one that would be effective in any way. The cost of an Ombudsman would be less than one percent of turnover. The supermarkets don’t want any form of close scrutiny as it would eventually lead to them having to stop the sharp practices they have developed over the years. They frequently misrepresent themselves as the consumer’s champions but in reality they, like all big business are only interested in their shareholders pockets. If they were consumer’s champions they would have stopped selling the salt and fat saturated garbage that passes as food. The biggest mistake the supermarkets have made is to treat us its customers like idiots, which will eventually be their downfall. Personally, I have reduced my shopping bill by at least one third by avoiding using the supermarkets.