Fact File: The Supermarket Ombudsman

A number of agencies are currently embroiled in the formation of this agency, in proceedings that have so far taken over a decade. What's the big deal?

What is a supermarket ombudsman?

Ombudsman (noun): government official who hears and investigates complaints by private citizens against other officials or government agencies.

A supermarket ombudsman (SO) in the UK would enforce the new Groceries Supply Code of Practice (GSCOP), protecting the rights of farmers and other grocery suppliers. In 2010 the GSCOP replaced the former Supermarket Code of Practice (SCOP).

Officially it will:

• act as an arbitrator between retailers and suppliers in relation to disputes arising under the GSCOP;
• receive complaints in relation to a breach of the GSCOP, and where appropriate to conduct investigations;
• publish guidance on specific provisions of the GSCOP when necessary;
• make recommendations to retailers on how to improve compliance with the GSCOP and to monitor progress on the implementation of such recommendations; and
• advise and report to the OFT on the operation of the GSCOP.

 From Competition Commission News release August 2009, available here

In short, it will enforce fair trading regulations on retailers, and allow producers to register complaints against these retailers without the risk of incurring retribution.

Who would it affect?

Food retailers with a turnover of more than £1 billion. This includes the ‘big four’: Tesco, Sainsbury’s, Asda and Morrison’s, but also The Co-operative (including Alldays and Somerfield), Marks and Spencer, Waitrose, Iceland, Lidl and Aldi.

Who is in favour of this?

Supermarkets that have signed up are (to date): Marks and Spencer, Waitrose and Aldi.

Other supporters include NGOs, academics and farming organisations: National Farmers Union (NFU) of England and Wales, NFU Scotland, British Independent Fruit Growers Association, Association of Convenience Stores, Campaign to Protect Rural England, Association of Master Bakers, Rural Shops Alliance, Country Land and Business Association, British Brands Group, Friends of the Earth, Action Aid, Traidcraft, Banana Link, War on Want and Breaking the Armlock Alliance. 

Why do we need one?

In 2006 the Office of Fair Trading (OFT) referred the supply of groceries by retailers in the UK to the Competition Commission (CC) for investigation (section 131 of the Enterprise Act 2002 states that it may do this if it has "reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services"). 

In other words, the OFT thought all was not well in the groceries industry, and it needed to be looked into.

The CC's report found two main concerns:

1. "several grocery retailers have strong positions in a number of local markets". i.e. it is very hard for smaller, local retailers to get a foothold in the market, resulting in the consumer having a lessening in choice, product quality and value for money.
2. "the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers". i.e. suppliers were expected to absorb costs for any variability in the market, reducing their ability to innovate and invest in future projects.

Other issues included:

• The large market share of Tesco (in 2008 they held almost 30% of the groceries market)
• The impact on the nation's health by the provision of cheap but poorly nutritional foodstuffs and alcohol
• Prospective purchasing of land by retailers to prevent its future use by other retailers
• Collusion between retailers
• The pressure placed on convenience stores by the presence of large out of town supermarkets

In all cases, the CC deemed that while these issues were of concern, they had no significant effect on cost or choice for the consumer.

What has been done so far?

The NFU website has an excellent timeline charting progress from 1999-2010. Other updates can be found at another of my favourite websites here.

Since the release of the CC's report in 2008 three supermarkets have signed up (as above). In January 2010 the government announced its intention for form a supermarket ombudsman.

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Since then, if I can take off my 'hat of objectivity', the government has been faffing. In October 2011 the government chose to ignore recommendations from two panels of MPs after submitting to the disbelief of the NFU. Since then there has been little in the news.

Obviously it is not in the interest of supermarkets to undergo stricter regulations, in much the same way the banks do not wish to be further regulated; it would force them to stop making some dodgy transactions.  If I can be especially cynical, I do not think it would be in the interests of the government for this bill to go through, as I suspect there are some important connections that may be put under pressure.

I for one will be campaigning on this - I think it's only fair that farmers in this country are paid a fair price for their produce. More to follow, no doubt