Laying down the law on fair trade in the retail sector
CONSUMERS in Ireland pay more for food than anywhere else in the EU, other than Scandinavia. In 2009, products like meat, milk and cheese — of which Ireland produces copious amounts — were at 37% over the average EU shop price.
We were 32% above average for the price of breads and cereals.
For all foods and non-alcoholic beverages, we were 29% above average.
In 2010, our retailers put out press releases welcoming the news that Ireland was only 20% above the EU27 average price for food and non-alcoholic beverages.
The Retail Ireland representative body welcomed the survey results showing prices were coming down, with its director, Torlach Denihan pointing out that the last time the price gap between Ireland and the EU average was this small was 2001.
Still, countries like Britain, Italy, France, Germany, Greece, Spain, Portugal and the Netherlands are all more affordable for food shoppers than Ireland.
Any shoppers who are unhappy with this state of affairs have until September 1 to make submissions for the Code of Practice in the forthcoming Competition and Consumer Bill. This is part of the process whereby the Government introduces a statutory code of practice for the retail sector.
Attempts to agree a voluntary code have failed, when the parties involved could not come to an agreement.
Retailers have been against a code of any sort from the outset, although belatedly preferring a voluntary code if one were to be introduced at all.
Dunnes Stores refused to even get involved in discussions on a voluntary code.
“Retailers do not want a code, do not believe that the need for one has been demonstrated, and think that a code will be a futile time-wasting burden, that will inhibit competition, and fuel inflation”.
These comments come from the Travers Report of last May on the retail sector, which includes a proposed statutory code of practice.
Retailers feared a bureaucratic burden on the grocery sector which would increase costs and lead to higher prices for consumers.
In a recent statement, they claimed: “Consumers have reaped the benefit of intense competition in the retail sector. Since mid-2008, food prices have fallen by 8%. Retailers seek the best value possible in their negotiations with suppliers so that lower prices can be passed on to consumers.”
“The EU is currently reviewing this whole area. It would be prudent for Government to await the finalisation of the EU review, consider the outcome and then align Irish practice with any European standards that may emerge”.
However, Fine Gael have been on the trail of fair trade in the retail sector since 2009, when they introduced a private members bill, claiming that the forced payment of €160 million in so-called ‘hello money’ by Irish suppliers to large supermarket chains put thousands of Irish jobs at risk.
Hello money is an alleged practice whereby retailers charge producers or suppliers an unofficial fee for making space for new products on the shelves.
Farmers are also clamouring for grocery retail legislation.
IFA are demanding that:
- Unsustainable practices, including below cost selling. are outlawed.
- Contracts between retailers and suppliers do not include provisions to support retailer promotions or discounting.
- A more equitable share-out of the consumer price across the food chain.
- Retailers be obliged to report details of their profitability and turnover in Ireland.
- Penalties be put in place for non-compliance with the code of practice.
- A limit be put on use of “own-brand”.
Moving towards a statutory rather than voluntary code of practice can be seen as something of a victory for farmers.
But with more than 80% of most farm produce ending up on export markets, EU-wide legislation is IFA’s ultimate target.
“If this is to have an impact, it must be tackled on a Europe-wide basis,” said a spokesperson.
Following the receivership at Superquinn, IFA president John Bryan has added a time limit on payments to farmers who supply retailers to his code of practice demands.
Submissions by September 1 to the grocerycode@djei.ie or contact the Department of Jobs, Enterprise and Innovation (www.djei.ie).
CENTRAL to the proposed retail code of practice will be the vexed question of protection for food producers and suppliers.
On the one hand, according to Declan Purcell of the Competition Authority: “In times of economic crisis, competition policy becomes even more important.
“The evidence from the US Great Depression of the 1930s and Japan’s more recent deep recession during the 1990s is that well-intentioned relaxations of competition policy, or to put it another way, protectionist policies, actually deepened and prolonged those recessions.”
On the other hand, unfettered competition and light touch regulation helped to trigger Ireland’s economic meltdown.
It is also the case the highly protectionist period from 1945 to 1973 in Western Europe saw unbroken economic growth.
THE proposed code of practice for the retail sector has four governing principles: consumers’ interest; fair dealing; a strong supplier base; and competitiveness.
Consumer interest requires wide choice, high quality and good value for money.
Fair dealing is about developing trading relationships in good faith in a fair, open and transparent manner. Activities, whether formal or informal, should be fair and lawful, provide reasonable certainty in respect of the risks and costs of trading, and do not involve the transfer of excessive risk or the exercise of duress.
The development and maintenance of a strong, innovative, efficient and competitive supplier/producer base in Ireland is also a recommended principle.
A competitive retail sector should “best meet the needs of consumers and proactively embrace the principle of fair dealing as outlined”.
The proposed code seems to opt for transparency as the key method to marrying all of its principles.
The phrase, “unless in the terms of business”, appears throughout the document in the key areas of payments and promotions — suggesting what might seem to be overly harsh is perfectly acceptable, once it is written down in advance.
It is proposed that retailers can ask for a payment for carrying a product when such payments are made in relation to a promotion; are for a product not stocked, displayed or listed in that store in the previous year; and reflect a reasonable estimate of the retailer’s risk in stocking, displaying or listing the new grocery items.
But no payments for better positioning of goods, unless in relation to promotions, should be allowed.
Retailers would be obliged to take reasonable care when ordering grocery goods at a promotional wholesale price, and not to over-order.
It is suggested that retailers must compensate suppliers for over-ordered product which it subsequently sells at a higher non-promotional retail price.
Increased transparency without being especially proscriptive is the tone of the proposals — laudable in many ways, but possibly ignoring issues of power imbalances between producers, suppliers and retailers. Notably, formal time limits for payments to suppliers were not proposed.
