Page last updated at 12:45 GMT, Tuesday, 4 August 2009 13:45 UK

Ombudsman urged for supermarkets

Morrisons, Asda, Sainsbury's and Tesco stores
The grocery sector was first referred to the Competition Commission in 2006

The competition watchdog has urged the government to establish an ombudsman to rule on any disputes involving supermarkets and suppliers.

The Competition Commission made the formal recommendation after supermarkets failed to agree on a voluntary arrangement.

It also published a strengthened code of conduct for the sector.

The measures follow the regulator's two-year investigation into the industry, which ended in April 2008.

In the consultation period that followed, Marks and Spencer, Waitrose and Aldi backed the creation of an ombudsman. But other grocery retailers opposed the move, saying it would create red tape.

"We made every effort to persuade retailers of our case as it would be the quickest way to establish the ombudsman," said Peter Freeman, the Competition Commission chairman.

"We are now left with no alternative but to set out the new code of practise and recommend the Department for Business, Innovation and Skills, set up the ombudsman," he said.

It said the ombudsman would cost about £5m a year to run.

'Piling on costs'

The British Retail Consortium (BRC) called on Business Secretary Lord Mandelson to reject the proposal, saying customers would lose out.

FROM THE WORLD AT ONE

"This should be about customers. The last thing needed at any time, let alone in a recession, is a multi-million-pound bureaucracy, unnecessarily piling on costs and pushing up shop prices," Andrew Opie, the BRC's food director said.

The new code of practice will prevent supermarkets from making adjustments to existing terms and conditions with suppliers and require them to enter binding arbitration to resolve any dispute with a supplier.

'Underhand practices'

Peter Kendall, president of the National Farmers Union, said that farmers and small businesses welcomed the move.

In the recession the situation has worsened, with suppliers coming under increased pressure
Fiona Gooch, Traidcraft

"There are a lot of underhand practices going on and we want someone to make them behave fairly," he told the BBC.

For years there have suggestions that supermarkets use their vast purchasing power and take advantage of small suppliers.

Mr Freeman from the Commission said their investigation had found that it was often customary for the cost of any product theft to be borne by the supplier.

'Increased pressure'

Traidcraft, which promotes fair trade, said the the new code would not protect small suppliers unless there was an ombudsman to enforce it.

"Nothing in the history of the supermarkets suggests they will be any more willing to apply this code than its predecessor. In fact, in the recession the situation has worsened, with suppliers coming under increased pressure," said Fiona Gooch, a senior policy adviser at Traidcraft.

"It is crucial the government acts swiftly to establish an independent ombudsman to stem unfair practices and help the grocery sector return to being a fair market," she added.



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