UK watchdog to outline plans for supermarket ombudsman

A competition watchdog in the UK is expected to outline plans today for the appointment of an independent ombudsman to protect supermarket suppliers.

The British Competition Commission is understood to be proposing a regulator to oversee the relationship between suppliers and supermarkets amid concerns over the treatment of suppliers.

In provisional findings of the 18-month investigation due later this morning, retailing giants such as Tesco, Sainsbury’s, Asda and Morrisons are also expected to come under fire for holding on to land to stifle competition.

The watchdog has been scrutinising the grocery sector since the probe launched last May, looking into the relationship between suppliers and retailers, local competition and planning issues.

Today’s findings, while only provisional, will provide a clear indication of the results of the inquiry and actions the commission intends to take.

In terms of supplier relations, the commission is expected to say the voluntary code of practice, which was introduced in 2000, is not working.

The move will please small suppliers following claims that they have been coerced into bearing the cost of supermarkets’ price-cutting campaigns.

Alongside the expected supplier protection measures, the commission is also thought to be planning changes to prevent so-called land-banking.

The watchdog is said to be hoping to stamp out the practice, whereby retailers can either hold on to land to stop rivals developing it, or sell on the land with “restrictive covenants”, under which they may not be used by another supermarket.

A widespread revamp of the planning system may also be on the cards, with today’s document set to suggest the axing of the current “needs” test, which requires supermarkets to demonstrate that a town requires a new store.

Speculation has also suggested that the commission will moot the idea of replacing the test with a “fascia” or competition test under which local authorities would be encouraged to look favourably on retailers who do not have a presence in the local area.

Rules that aim to protect town centres from out of town superstores are also set for change under the commission’s plans.

Farmers, suppliers and small retailers are hoping the findings will see a shake-up of the grocery market.

The National Farmers’ Union said it would welcome an overhaul of the voluntary code of practice regulating the relationship between suppliers and grocers, which it claims is “inadequate”.

Robin Tapper, senior adviser for food chain relations at the National Farmers’ Union, said: “There has to be an acknowledgement that the grocery market is not functioning properly.

“It may seem in the short term that what’s happening is good for consumers but in the long term we firmly believe that if we don’t have a transparent market, it will be disastrous for consumers in terms of quality and choice.”

In August, the commission ordered two of the UK’s biggest supermarkets to hand over emails and letters between themselves and suppliers as part of the investigation.

The news came amid reports that the commission made the move after accusations that these grocers had threatened no longer to use suppliers unless they dropped their prices.

The final results of the inquiry are not due to be published until next year, with the investigation timetable having been put back earlier this year.

The commission was originally hoping to publish the provisional findings in June with final results due in November.

The investigation is the third of its kind into competition in the supermarket sector in seven years after a market-wide inquiry in 2000 and an examination into the issues arising from a battle for Safeway three years later.