By Max Clarke

This morning will see the first hearing of a new Groceries Code Adjudicator Bill in which a ‘supermarket ombudsman’ will act as adjudicator between supermarkets and suppliers, in order to regulate prices and protect suppliers.

The move was initially criticised by the British Retailers Consortium who claimed it will fuel food inflation. Now, a small business group, the Forum for Private Business, is suggesting that the Bill will be ‘toothless’ if the ombudsman is not given the power to fine unscrupulous retailers.

Further, the Forum wants the Government to introduce a ‘multiplier fine' for repeatedly flouting the Groceries Supply Code of Practice.

The organisation is urging MPs on the cross-party committee to push for the additional financial powers for the ‘adjudicator' as well as the authority for it to make recommendations to retailers and require them to publish information about investigations.

"Mistreatment of smaller suppliers by supermarkets is a constant, pressing problem and awarding the ombudsman powers to impose financial penalties would be more likely to ensure compliance of the code," said the Forum's Head of Campaigns, Jane Bennett.

"The Forum is urging MPs on the committee to make a difference to struggling smaller suppliers across the UK and give them some proper protection."

She added: "As it stands the Bill does not allow the ombudsman to fine retailers in breach of the Groceries Code but provides for this ‘if the Secretary of State adds a power to do so'".

"We think this power must be a basic essential for the Code to be effective and for the adjudicator to have any real teeth. We have to hit supermarkets which flout their responsibilities where it hurts."

The Forum is also concerned that, according to the wording of the Bill, the ombudsman will arbitrate disputes between large retailers and direct suppliers only — which risks leaving subcontractors further along the supply chain open to continued abuse at the hands of supermarkets.
The Forum is recommending that the new ombudsman should be funded by retailers, based on profit rather than turnover as has been suggested — in order that consumers do not end up footing the bill.

In 2008, the Competition Commission's investigation into the groceries market concluded that, although it is often difficult for small retailers to compete with large supermarkets, their future was not under threat.
However, the Forum argued that this finding contradicts evidence from the All-Party Parliamentary Small Shops Group, which in 2006 warned that the majority of the UK's independent retailers could disappear by 2015, based on the then rate of 2,000 shop closures per week.

Despite 76% of Forum members surveyed in 2009 supporting the introduction of a watchdog to oversee the groceries sector, the protection itself has been painfully slow in arriving.

"We are extremely disappointed at how long it has taken for these measures to be introduced," said Ms Bennett.
"It has been 11 years since the Competition Commission first raised concerns about the relationship between large supermarket chains and their suppliers and three years since the Commission recommended the creation of a supermarket code and an adjudicator to enforce it. The ombudsman itself will not be in place until 2013.

"While we welcome Government action to combat the appalling way supermarkets often treat their suppliers, the process of enacting rules to combat the problem has been slow in coming and many small retailers have been lost during that time. Unless these measures are made more robust, it will have been a long wait for nothing."

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