Businesses have harshly criticised a government watchdog's ruling that no change is needed in the way supermarkets conduct business with their suppliers.

The Office of Fair Trading (OFT) yesterday claimed there is no clear evidence that the Supermarkets Code of Practice is not working and that competition in the market for the supply of groceries is being restricted. It did concede that the Code could be used more effectively.

Business groups, however, slammed the decision.

"The code is toothless, and vague proposals to use it more effectively will not make it bite," said Duncan Swift, head of Grant Thornton's food and agribusiness recovery group. "The OFT seems undecided whether to use carrot or stick in its drive to improve the code."

The result was branded a 'whitewash' by the National Farmers Union for Scotland (NFUS).

The union declared that the study was flawed because the OFT will never receive on-the-record complaints from suppliers about unfair supermarket trading practices because it does not offer any protection to those who may be willing to raise their voice.

The OFT received 29 responses to its invitation for comments in its investigation.

"I am astonished that the OFT can continue to claim there is no evidence that the supermarket code needs changed and that the market is working well for consumers," said NFUS president John Kinnaird.

"We sent them exactly that evidence, but again, the OFT has chosen to ignore it because we didn't put the names of the companies suffering from the disgraceful trading tactics in our evidence."

Kinnaird said that supplier fear of losing supermarket contracts as a result of complaining is so pervasive that the Supermarkets Code of Practice is never used.

The Code, which applies to Asda, Sainsbury's and Tesco, would be better enhanced by greater use of written records of dealings between supermarkets and their suppliers and clear evidence of breaches, rather than general allegations, the OFT said.

OFT chairman John Vickers said that an independent ombudsman, as some groups have called for, would also require complaints to be transparent and sourced.

"Natural justice and common sense do not allow regulatory intervention in markets without proper evidence," he added.