Grocers likely to escape fines under ombudsman’s regime

The big grocers are likely to escape fines for infringements of the Groceries Supply Code of Practice following the creation of an ombudsman’s office.

As the Government prepares to make a formal response to the consultation on the new body’s formation, it is understood that ministers are leaning strongly in favour of a policy of naming and shaming offenders, rather than imposing cash penalties.

The decision will be greeted with sighs of relief among supermarket chiefs, but is likely to disappoint many of the suppliers that the code is designed to protect.

One source familiar with ministerial thinking on the ombudsman said: “Ministers feel that a naming and shaming regime will be more effective. The long-term impact of shoppers going to another supermarket would outweigh a short, sharp fine.” However, he said that, should there be any problems with the preferred system, ministers will also have “reserve powers” and be able to impose penalties.

He said that adopting a system of fines as a first resort would be extremely complicated, necessitating, for instance, an appeals process, and might not produce the desired results.

But one industry source, who believes supermarkets have too much power, said the lack of financial penalties was disappointing. In the light of the earlier failure of the Competition Commission to get big grocers to voluntarily set up a monitoring body, he feared the new one might lack teeth.

He was also concerned about whether the ombudsman would only be able to hear complaints directly from suppliers, or from a wider pool.

He said: “I don’t think they totally grasp the culture of fear [among suppliers]. The new body needs to be able to gather intelligence by any means possible.”

It is hoped that the Government response will be issued by July 29. However, it is understood that a high volume of work across Whitehall because of the parliamentary recess might push back the date.

The Groceries Supply Code of Practice, which the new body will enforce, came into force in February this year and applies to all stores with an annual grocery turnover of £1bn or more.