This challenge, from fair trade organisation Traidcraft, comes as the Competition Commission today (Tuesday) published draft details of the proposed ombudsman and starts a 30 day consultation period before issuing its final undertakings.
The supermarkets will then be asked to sign up to the ombudsman plan, which they allege would lead to increased prices for consumers.
But those fears were dispelled in recent independent research by leading economist Professor Roger Clarke who says: "The remedies, if effectively enforced, are likely to lead to lower prices in some cases, like agricultural products. Even very small price reductions and other benefits are likely to result in consumer benefits far outweighing the modest cost of the ombudsman."
In the case of Tesco, which recently reported record £3bn annual profits, less than 5 hours of trading profits would cover its full annual contribution towards the cost of an ombudsman.
Fiona Gooch, Traidcraft senior policy advisor, said: "In this draft undertaking, the Competition Commission makes it clear that part of the cost of the ombudsman borne by the retailer will be proportional to the bad practice or concerns raised – so objections can only mean that a supermarket has something to hide. It's time for supermarkets to sign-up or own up.
"And it's surprising that some supermarkets are objecting to these modest proposals as supermarket support for an ombudsman would demonstrate its commitment to fair dealing to its customers."
An extensive two-year inquiry into the grocery sector revealed consistent flouting of the existing voluntary code prompting the Commission to strengthen the grocery sector code of practice (GSCOP) due to come into effect by the end of this year.
The British Retail Consortium recently claimed that "the Competition Commission found no evidence of systematic failure in retailers' dealing with suppliers."
However, sharp practices by supermarkets towards suppliers such as retrospective changes to unit prices and demanding rebates without prior agreement, were exposed by the Commission, who received submissions about poor practices by Tesco, Asda, Sainsbury's, Morrisons, Somerfield, Co-op, M&S, and Waitrose[1].
Fiona Gooch said: "The fiasco of the banking sector clearly demonstrates that multi-billion pound sectors which are vital to the lives of UK consumers can't be left to voluntary or weak measures.
"In the case of supermarkets it would be particularly unwise, as evidence from the Competition Commission’s latest inquiry shows that grocery retailers repeatedly breached the code they voluntarily signed in 2001 and abused their buying power when dealing with suppliers."
[1] Competition Commission Groceries Market Investigation Final report Appendix 9.8
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Notes to Editors:
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Professor Clarke, based at Cardiff Business School, is a microeconomics expert on competition policy and is available for interview or comment.
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Professor Roger Clarke’s paper entitled The Impact of a Groceries Ombudsman on Consumers’ Best Interests is available here.
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The 11 retailers recommended to be covered by the groceries ombudsman are: Aldi, Asda, The Co-op (which includes Alldays), Iceland, Lidl, Marks & Spencer, Morrisons, Sainsbury’s, Somerfield, Tesco (which includes One Stop) and Waitrose.
CONTACT: Melissa Duncan (+44) (0)7831 576103
