Yesterday the Government published long-awaited draft legislation to create a supermarket watchdog, or ‘Groceries Code Adjudicator’ to give it its full name. While it may sound like a character from a second-rate Arnold Schwarzenegger film, the Adjudicator has the rather more prosaic but important role of preventing supermarkets from exploiting their suppliers.
There were no major surprises in the draft Bill, as by and large the Government stayed true to the course set in its response to a publication on the watchdog last year.
On the plus side, suppliers based outside the UK, including farmers in developing countries, will be able to make complaints to the Adjudicator. Suppliers will also be able to complain anonymously, as otherwise the 'climate of fear' will prevent them from doing so. The Adjudicator will also have the power to force supermarkets into providing any information it needs to carry out investigations into bad practice.
Areas of concern remain however.
Anonymity: Only suppliers will be allowed to make complaints. Third parties such as farmers’ associations and charities will be excluded. This raises concerns as even though suppliers could complain in confidence, there’s no failsafe guarantee that supermarkets won’t be able to trace who the whistleblower is.
Penalties: If a supermarket breaks its rules the Adjudicator will make recommendations to the retailer to change its ways, but these won’t have any legal force. In severe cases the Adjudicator could force supermarkets to publish adverts about their misdeeds. However, negative publicity hasn’t stopped supermarkets from mistreating suppliers in the past.
The draft Bill contains ‘reserve powers’ that will allow the Adjudicator to fine supermarkets if, at some point in future, it turns out that the current set of penalties aren’t strong enough. But it’s clear that without the ability to fine retailers from its establishment, our watchdog will look more of a Chihuahua than the Alsatian needed to keep supermarkets in check.
Resources: The Adjudicator’s operating costs are estimated at £800,000 a year, to be paid for by retailers. Given the top five supermarkets pocketed more than £5 billion in profits last year – and the £150 billion spent on food by British shoppers annually – this seems a miserly amount.
Not surprisingly, the British Retail Consortium has slated the Government's plans, repeating its mantra that the watchdog will add to runaway food price inflation. Interestingly, the supermarket lobby group notes that its views are not representative of Waitrose, one of its higher profile members. Perhaps this might this be because Waitrose, like the Government*, agrees that the Adjudicator is likely to bring prices down over the long run.
So what next? The Business, Innovation and Skills Select Committee will scrutinise the draft Bill in June, and is currently inviting submissions for its inquiry. But the key concern is finding space in the current session of Parliament for the final Bill to be passed. Ed Davey, the Minister in charge, is equivocating over the timeline, saying he hopes the final Bill will be published this session but there are no guarantees. If we have to wait for the next session in summer 2012, the Adjudicator would not get up and running until 2013 or even 2014.
Commenting on yesterday’s announcement, the British Retail Consortium director Andrew Opie said there’s no need for a watchdog as: “It’s in supermarkets’ own interests to have good long-term relationships with their suppliers.” We couldn’t agree more, and what better reason to support an Adjudicator that will promote positive relations between supermarkets and their suppliers?
*See clause 86, page 42 of the draft Bill.