30 Apr 2008


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Get tough threat to supermarkets over supplier ombudsman

Competition Commission

supply chain

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Grocery retailers will be forced to set up their own industry ombudsman to police supermarket-supplier relationships – or have an even tougher watchdog imposed on them, says the Competition Commission (CC).

In its final report into the UK grocery sector, out this morning, the commission says it will seek undertakings from major grocery retailers to establish the ombudsman.

His role will be to make sure supermarkets comply with the new, tougher Groceries Supply Code of Practice – another key plank of the commission's findings.

The ombudsman would

> arbitrate in disputes between suppliers and retailers

> receive and investigate complaints from suppliers

If the supermarkets failed to reach agreement on setting up the ombudsman within a “reasonable period”, the Department for Business should take steps to do so.

The commission added that, if this were the case, the ombudsman should be given “the power to levy significant financial penalties on the retailers for non-compliance”.

And it said that if neither the retailers nor the Government set up the ombudsman within a reasonable time, the OFT should step in and carry out its main functions.

Further supply chain measures include:

> Retailers are prohibited from making retrospective adjustments to terms of supply.

> Retailers are prohibited from entering into arrangements that result in suppliers being held liable for losses due to shrinkage.

> Retailers are required to enter into binding arbitration to resolve any dispute with a supplier under the new code of practice.

> Retailers are required to provide notice of and reasons for de-listing suppliers or significantly reducing suppliers' business.

> Retailers are required to keep written records of all agreements with suppliers on terms of supply.

The measures set out this morning also include plans to hand the OFT a key role in deciding planning applications for new supermarkets.

Click on the link to see the full measures laid out by the Competition Commission this morning.

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