NFU Scotland (NFUS) has warmly welcomed the provisional report from the Competition Commission, which finds that the UK groceries market is delivering a good deal for consumers but action is needed to improve competition in a number of local markets and to address relationships between retailers and their suppliers.
In its findings, published today, the Commission states that a lack of competition in certain local markets not only disadvantages consumers in those areas but also allows retailers to weaken their offer to consumers nationally. Further, some retailer land holdings and other practices, such as restrictive covenants, mean that competition is not as effective as it could be in a number of areas.
The Commission said it is concerned about the ability of grocery retailers to transfer excessive risk and costs to suppliers through various purchasing practices, such as retrospective changes to supply agreements, and considers that these practices could damage investment and innovation in the supply chain to the ultimate detriment of consumers.
Peter Freeman, Chairman of the Commission and Inquiry Group Chairman said: “Our focus throughout this inquiry has been whether consumers are receiving the benefits of vigorous competition, such as value, choice, innovation and convenience, and on most counts the groceries market delivers just that. However, we feel that consumers could be even better served.
“Having looked in detail at local grocery markets, in most areas shoppers have a good choice and benefit from the strong competition between retailers, but in a number of local areas more competition would benefit consumers both locally and more generally.
“We are concerned that retailers could be using existing land holdings and restrictive covenants to frustrate potential competition. Further, whilst we understand that the planning system has to balance conflicting demands, not all of which favour development, it can act as a barrier to new competing stores.
“We do have concerns about aspects of the way retailers deal with their suppliers, which, if left unchecked, could harm consumers. We are concerned that the transfer of unexpected costs and excessive risk on to suppliers is likely to affect their ability to invest and innovate, which could then adversely affect product quality and innovation for consumers. Whilst the Code of Practice does have some effect, it does not entirely prevent the potential harm.
“As a result of these concerns, we have published a list of potential measures to enhance and preserve competition which we will now look to discuss with all interested parties before we publish our final report next year.”
The NFUS say that, for the first time, the competition authority raises the prospect of a supermarket ‘ombudsman’ to police the relationships between the big retailers and suppliers, and enforce the Supermarket code of practice, a development which they have been campaigning for. Chief executive Andy Robertson said: “The big four supermarkets have cornered the grocery market and, sadly, this dominant position is used too often to mistreat suppliers. We have fought for this inquiry and for greater regulation of supermarkets because we genuinely believe that without better policing in the food supply chain, the future supply of local, Scottish food is under real threat.
“Farmers will welcome recognition by the competition authorities that action is needed to provide greater protection for suppliers. We have been arguing for the introduction of a ‘policeman’ into the grocery market to ensure fair trade between supermarkets, food and drink processors and farmers.
“The farming industry needs and wants to work with supermarkets; they sell three-quarters of all we produce. However, we can’t afford to work with them at any cost. All we want is a supply chain that operates fairly, rewards quality and allows every link in it to make a living.
“An ombudsman, which needs to be independent, proactive and have the power to tackle abuses where found, would be a huge step forward. I would hope the supermarkets will embrace the idea of an ombudsman which would be able to spotlight best practice and highlight those supermarkets for whom fair trade is more than just a neat catchphrase.”
One person has commented on this article. 1. Scottish farmers welcome Competition
K Piper, Unregistered I don't agree with the statement that there is choice. There is very little choice eg types of apples, different brands of products.
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