Tesco report highlights need for retail watchdog in Ireland

Last week, a lady named Christine Tacon added to Tesco’s long list of woes. Ms Tacon is, in effect, Britain’s retail ombudsman, though her official title is ‘groceries code adjudicator.’
Tesco report highlights need for retail watchdog in Ireland

She seems to be taking her job seriously.

In a hard-hitting report, she concluded that the grocery giant “deliberately delayed payment to suppliers and, in some cases, paid them less than they were owed, in order to meet financial targets.”

The ombudsman considered the breaches to be “very serious”, while highlighting her concern at “unilateral deductions from suppliers”.

She recommended a halt to such deductions to allow time — at least 30 days — for these to be challenged by the supplier.

Significantly, the company was instructed to provide its suppliers with greater transparency.

Tesco is by no means unique: one could hazard a guess that pretty well all the large grocers have cracked the whip in their dealings with their many thousands of suppliers.

Competition in the grocery world is cut-throat and has become more so with the advent of the German discounters, who have shaken up what was — in Ireland — a rather cosy market.

We can only guess at just how fat were the profit margins enjoyed by the big grocers.

Why major commercial players like Tesco, Lidl, or Dunnes, or, for that matter, Vodafone, and other major consumer brands, have not had to disclose separate Irish profit figures beggars belief.

Consumers are entitled to know the size of the profit margin extracted by each of the major players.

But producers also have a right to be treated with respect and to be provided with certain, minimum guarantees.

Such respect is often lacking and it is serving as a major obstacle for businesses in the early stages of expansion.

Farmers, too, have found themselves increasingly squeezed.

The result is that enterprise — at both primary and secondary level — is being choked off.

There are calls for the establishment of an independent retail ombudsman in Ireland, to act as advocate and investigator, so as to reduce the number of abuses of dominance in the system.

The ombudsman should ensure that people bringing complaints are not victimised, for example, by having their products removed from the shelves.

The law favours large companies in dominant commercial positions.

These firms are able to access the large corporate law firms at will. The State needs to correct this imbalance.

Farming organisations have played a role in highlighting allegations of misbehavior in the food sector.

The IFA led a large march to the offices of the Competition Authority a couple of years back, following a dawn raid on the IFA offices.

At the time, the Irish Creamery Milk Suppliers’ Association (ICMSA) president, John Comer, described the authority as “brass-necked and partisan.”

In October, 2013, the Oireachtas Joint Committee on Agriculture, Food and the Marine issued a report on the grocery sector, calling for ‘increased equity and transparency in producer-processor relationships.

Dunnes Stores declined to appear before the committee.

The committee concluded that “it is difficult to ascertain who is getting what out of the final consumer price for food in Ireland.”

It suggested that heavy penalties be applied to firms engaging in illegal practices along the food chain.

The Competition Act, 2012, did introduce provision for greater private enforcement of competition law, but little appears to have changed.

A recent article issued by lawyers, A & L Goodbody, concluded, however, that “due to national procedural obstacles and legal uncertainty, very few victims currently seek or obtain compensation.”

The law across the EU varies from country to country.

The EC has proposed a directive aimed at harmonising the law and assisting both businesses and consumers in bringing claims for losses from anti-competitive behaviour.

The old Irish Competition Authority has certainly been active in areas such as merger control, while tackling the problem of cartels and price-fixing, but the suspicion remains that, at least until the arrival of the German discounters, Ireland provided easy pickings for the big players.

One can only guess at the extent, due to the limits on the availability of financial information.

However, hopes raised back in 1991, when competition laws were enacted, about a new era of enforcement of private rights, have not materialised.

The Troika lenders sought to push through an overhaul of competition policy, following the infamous ‘bailout’ in November, 2010, but one wonders whether their guns were trained in the right direction.

Do competition bodies have a problem dealing with customers who find themselves in very strong positions, relative to their suppliers?

John Clifford and Sorcha O’Carroll, of the Canadian law firm, McMillan LLP, question why Canada merger investigations have typically focused on the exercise of monopoly power in downstream markets, with barely a mention of monopsonies.

They concluded that, on the surface, it is easier to get concerned about monopolies that act to transfer wealth from consumer to producer.

Powerful ‘monopsonies’ can argue that cost savings are passed on to the consumer.

What politician is going to argue with companies that guarantee low grocery prices?

Clifford and O’Carroll conclude that overly powerful buying groups ultimately prevent their suppliers from making investments in their business, as confidence and financial resources are lacking.

This results in decreased output in the long run.

In Ireland, we have organisations like Bord Bia and Enterprise Ireland acting to support enterprise creation, yet we have a commercial situation that frustrates such aims. This really does not make sense.

The new Competition and Consumer Protection Commission needs to look, again, at how it is allocating its resources in the battle to secure fair play in the commercial arena.

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