Adjudicator appointed to prevent supermarket giants abusing suppliers

1 Jul

groceries

 

The role of ‘Groceries Code Adjudicator’ has been formally established in law, with powers to advise suppliers to major supermarkets and to arbitrate disputes.

In line with a clause requiring the position’s creation under the Groceries Supply Code of Practice, an independent adjudicator was required to ensure the Code was fully and effectively incorporated into the terms of supply between major retailers and suppliers. This decision was supported through a consultation with 60 stakeholders.

It has emerged that the blockbuster supermarkets have occasionally been guilty of abusing their superior market position. This is delineated clearly in the fact a rule was required stipulating that retailers “may not require suppliers to pay for shelf space, although payments may be required for promotions or new product listings, where the payments are proportional to the risk incurred by the retailer in stocking the new line.”

Farmers have to pay supermarkets a ‘risk premium’ to stock their more unusual produce? What would it take to sweeten the deal on a cake recipe that had never been trialled? A line of damson jam? Should small suppliers have to subsidise the likes of Tesco and Sainsburys for the type of ‘risk’ that is a normal part of business life? Does consumer demand for ever-cheaper groceries come at a very high price for British agriculture?

The Groceries Code also stated that retailers “may not require suppliers to make payments for wastage unless due to the supplier’s default or negligence, or as provided for in the supply agreement.” Which suggests that previously, if stock went past its sell-by date while on the shelf, the supermarket would have been able to claim compensation?

Christine Tacon, who has been appointed the Adjudicator, will receive submissions and complaints in strict confidentiality. The department is already open to allegations of violation of the Code but stresses, “We will only be able to launch investigations after we have completed our consultation and finalised our guidance. We anticipate this will be by the end of the year.”

Further information on the relevant bills is available on the Department of Fair Trading website, but the results of the consultation were not published in full because many of the submissions were made in confidence. Those consulted included major retailers, suppliers, trade associations, non government organisations (NGO’s), unions, other Government bodies, church groups, charities and a number of private individuals (most of whom responded in support of ActionAid’s “Who Pays?” campaign.) All those who consented were sent a copy.

The Department of Fair Trading also stresses that only those engaged as suppliers or vendors of groceries, as defined in the following list, fall under the remit of the GCA. “Groceries” consist of: “food (other than that sold for consumption in the store), pet food, drinks (alcoholic and non-alcoholic, other than that sold for consumption in the store), cleaning products, toiletries and household goods.”

The definition does not include “petrol, clothing, DIY products, financial services, pharmaceuticals, newspapers, magazines, greetings cards, CDs, DVDs, videos and audio tapes, toys, plants, flowers, perfumes, cosmetics, electrical appliances, kitchen hardware, gardening equipment, books, tobacco and tobacco products.” So any tobacco company worried it is not getting a fair deal for its carcinogenic carbon-sticks will have to go elsewhere. Dyson too would not be able to cry foul if Aldi reneged on a contract for its vacuum technology, at least not to the Groceries Code Adjudicator.

Among the other important clauses of the Code are that “A Designated Retailer must not require significant changes to supply chain procedures without reasonable notice in writing or full compensation for costs incurred as a result of the failure to give reasonable notice.” Also, that payment must be sent through a reasonable time after invoice.

 

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