OFT probe clears supermarkets
Suppliers ‘must use code of practice’
The Office of Fair Trading has cleared UK supermarkets of any serious breaches of the four-year-old Code of Practice governing dealings with suppliers.
The watchdog said that while supermarkets are, by and large, complying with the code, suppliers are not making use of it when there is a problem.
Sir John Vickers, OFT chairman, said: “Supply relationships work best for consumers when there is competition and straight dealing. There is extensive complaint about supermarket dealings with suppliers, and some – but not a lot of – evidence of past code breaches.
“This code, like any other, can work only if evidence comes forward. We are keen for further evidence to inform our continuing scrutiny of the supermarket sector.”
The compliance audit of supermarkets looked at at a sample of 500 grocery supplier relationships with the big four supermarkets – Tesco, Sainsbury’s, Asda and, since its takeover of Safeway last year, Morrisons. It found some evidence of supermarkets asking suppliers for lump sum loyalty payments, a breach of the code, but said this mostly concerned Safeway before the acquisition.
The report said: “Without the use of mediation to resolve disputes as envisaged by the code, it has been difficult to assess the code’s ffectiveness. The code’s success depends on it being used. The OFT believes that suppliers should overcome the fear of complaining and use the code’s dispute resolution procedure when they have concerns about their dealings with supermarkets.”
It added that “it is legitimate for supermarkets to compete vigorously for supplies on quality and price allowing consumers to benefit from value and choice through effective competition.”
The OFT said varying the code “would be unlikely to tackle its perceived ineffectiveness and would have legal and practical difficulties. No code can be successful in dealing with allegations of breaches unless there is evidence of those alleged breaches.”
The OFT added that it is aware of wider concerns about the growth of supermarkets, in particular the consequences of the acquisition of convenience stores by supermarkets; the growth of non-food sales, and the effect of below-cost selling and price-flexing. Supermarkets, suppliers and stakeholders are being invited to provide evidence to the OFT on both g the issues identified by the compliance audit, and these wider competition concerns by May 31.
British Retail Consortium director general, Kevin Hawkins said: “The BRC welcomes the OFT’s conclusions from the audit of the code. As we
expected, the audit confirms that the retailers are observing the code and doing their best to make it work. We also welcome the OFT’s call to suppliers to overcome their fear of complaining and make use of the code.
“The OFT has once again emphasised that competition between food retailers is delivering important benefits to consumers. It has also reminded suppliers that any future complaints must be based on firm evidence and that the
practices complained of must be shown to be preventing, restricting or distorting competition.”
[img r]tescoleahy2.jpg[/img]”Tesco chief executive, Sir Terry Leahy said: “We are pleased that the audit found no single instance of a breach of the code at Tesco. Our compliance with both the spirit and letter of the code encourages strong supplier relationships. That is not to say problems do not arise – they
do, but our close relationships with suppliers mean that these are aired and usually resolved by constructive discussion.
“The OFT agrees that consumers benefit from vigorous competition for supplies on both quality and price and there is nothing to suggest that the market is not working well for consumers.
“We agree with the OFT that suppliers should not be apprehensive about complaining to us. As the audit shows, suppliers do take up issues with us regularly and to support this process we will be appointing a code compliance officer to hear formal supplier complaints, confidentially if requested.
“We also want to know what suppliers think of Tesco and how they find working with us. To achieve this we have launched the biggest supplier survey of its kind, sending out questionnaires to our UK suppliers. The results will help us understand what is good and where we can improve.
“The OFT has an ongoing responsibility to consider competitive conditions under the Enterprise Act 2002 and we note their request for information in this context.”
