The current Competition Commission enquiry into the ‘grocery retail sector’ is the sixth they have run since 1999.The sector is dominated by supermarkets, and in particular the ‘Big Four’ (Tesco, Asda, Morrison’s and Sainsbury’s) who account for around three quarters of all groceries sold in the country.
The Competition Commission’s ultimate concern is whether consumers are getting a good deal in terms of choice, price, convenience and innovation. That remit includes looking at whether the relationship supermarkets have with their suppliers impacts on consumers and whether these retail giants are distorting the market, making it increasingly difficult for smaller players to survive.
The Commission released its provisional findings in October 2007, after more than a year of evidence-gathering and analysis. The report caused a wave of reaction in the press from a wide range of groups including professional organisations representing farmers and large business, MPs, owners of small shops and campaigners.
The provisional recommendations on how to remedy the problems identified in the October report have now been published and look set to stir up even more controversy.
Why the enquiry is important to poor people
So why is there so much interest in a fairly obscure official body?In the UK, the question of supermarkets – and whether they are too powerful – brings together many of today’s concerns, from obesity to airmiles; from the threat to rural communities to the rise of ‘clone towns’ where every shop is a chain store.
Traidcraft’s concern is about the effect these large retailers have on their suppliers, especially those in developing countries who supply, for example, green beans from Kenya or bananas from the Windward Islands.
Buyers from big companies (the few individuals who negotiate multi-million pound deals to supply certain goods) hold a lot of power. This power could be used to help tackle poverty and bring the benefits of trade to small farmers and workers.But ‘buyer power’ can also be used to force lower and lower prices out of suppliers, and put unreasonable demands on them. This kind of pressure is then transferred down to workers who have to put in unpaid overtime or farmers that receive low prices for their food.
We have been working closely with companies for years to help them to improve the impacts they have on people in developing countries.However, not all companies are prepared to act responsibly, so as well as encouraging good practice we also campaign to minimise the harm they can cause – for example through the Company Law campaign in 2006. Our work on supermarkets is aimed at ensuring that suppliers get a fair deal while consumers get a fair choice.
What the Commission is considering
In its provisional findings in October 2007, the Commission found evidence of some unfair practices used by supermarkets to squeeze the most from their suppliers.Examples included
payment delays, excessive payments for customer complaints, and retrospective price changes after delivery.
Although not thought to be widespread the practices identified were of sufficient concern to lead the Commission to recommend remedies that could help poor producers and other suppliers to supermarkets. It has recommended that the existing voluntary Supermarket Code of Practice be tightened up and extended to all retailers with more than £1 billion turnover. It has also supported the idea of a watchdog to oversee and enforce the Code.
Traidcraft supports these measures and is campaigning to see them realised. In particular, we want to see a regulator that is able to act as sufficient deterrent to stop further abuses. This means one that:
- can handle the ‘climate of fear’ that suppliers feel because of the impact that losing supermarket customers would have on their business;
- is dynamic, identifying abuses, updating its role and establishing benchmarks for acceptable behaviour;
- is able to initiate investigations;
- is independent, to gain confidence of suppliers and retailers;
- covers the entire supermarket supply chain, irrespective of national borders, to prevent new ‘intermediaries’ being introduced to deflect accountability;
- has the power to name or fine offenders.
The Commission is now consulting on their recommendations and will produce their final report in a few months’ time. We will continue lobbying to ensure they call for a strong regulator in their final recommendations. The challenge is then to make sure that the UK government acts on the recommendations.
