The UK parliament is progressing a bill to establish a new supermarket watchdog, the ‘Groceries Code Adjudicator’ (Adjudicator), to enforce the ‘Grocery Supply Code of Practice’ (Code).
The UK government confirmed on 4 December 2012 that the Adjudicator will have ‘more teeth’, with the power to fine large supermarkets who act unfairly towards their suppliers.
The change comes after British suppliers lobbied government, claiming the Adjudicator’s enforcement role needed muscling up. Previously, the bill provided for the Adjudicator to only be able to make recommendations to supermarkets to take action to comply with the Code and to require the publication of information which named and shamed the large supermarkets. Although the new power is expected to be used as a tool of last resort, it should send a clear message – in the ‘dollar-and-cents’ language of the supermarkets – to play fair.
The UK Competition Commission (Commission) originally recommended the establishment of the Code and the Adjudicator as part of its market investigation into the supply of groceries in the UK (which concluded in 2008). The Commission was concerned about the exercise of buyer power by certain supermarkets through the adoption of supply chain practices that transferred excessive risks and unexpected costs to their suppliers.
The UK parliament has cast a wide net in addressing these issues, proposing to give the Adjudicator the power not only to arbitrate disputes between retailers and suppliers, but also to investigate confidential complaints from direct and indirect suppliers – whether in the UK or overseas – as well as third parties. The Adjudicator will also be responsible for enforcing the Code, which applies to all retailers with a turnover of £1 billion in groceries in the UK.
The Code obliges large supermarkets to deal fairly with their suppliers – for example, it limits large supermarkets’ powers to ‘de-list’ suppliers and to make suppliers pay for the stocking of their products. It also requires retailers to pay suppliers within a reasonable time and not vary supply agreements retrospectively.
The bill completed its committee stage on 18 December 2012 but the date for its report stage and third reading is yet to be announced.
The ACCC is also on record for turning its attention to the treatment of suppliers by the major supermarket chains and is understood to be currently investigating allegations of misuse of market power as well as allegations of unconscionable conduct by major supermarkets towards suppliers.
