Small businesses that supply supermarket chains should now be better protected after a new code of practice launched today.
Supermarkets have now been banned from practices such as changing supply terms retrospectively or asking suppliers to fund two-for-one promotions.
The new Grocery Suppliers Code of Practice (GSCOP) will also force large retailers with an annual turnover of more than £1bn to keep written records of their negotiations with suppliers.
The code, which replaces the Supermarket Code of Practice, follows long-standing complaints from suppliers and a two-year inquiry into alleged abuses in the £125bn a year groceries market which found that supermarkets were passing on excessive risks and unfair costs to suppliers.
The Competition Commission (CC) outlined the new terms in August last year, saying they were needed "to ensure that suppliers do not have costs imposed on them unexpectedly or unfairly by retailers".
The CC also recommended the creation of an ombudsman to monitor compliance with GSCOP, with the power to levy penalties on retailers breaking the rules. The government will begin a 12-week consultation on Friday to decide how the proposed ombudsman would work.
The British Retail Consortium said that the strengthened code of practice makes the governing body unnecessary because the effort and money large retailers will put into compliance show that they accept their responsibilities as the dominant forces in the supply chain.
However, a study conducted by the Forum of Private Business (FPB) last month found that 76% of small businesses wanted an ombudsman to oversee the code, while 74% also wanted guaranteed anonymity when giving evidence to the Office of Fair Trading or Competition Commission.
The FPB said it was concerned that many small suppliers will be reluctant to speak out against the supermarkets openly, for fear of having their products pulled.
“Small suppliers and retailers continue to suffer as a result of supermarkets’ anti-competitive practices. One of the main problems is that many suppliers feel intimidated into silence and do not speak out; a situation we need to change,” FPB chief executive Phil Orford said last month.
© Crimson Business Ltd. 2010
