The Competition Commission (CC) has formally recommended to the Government that it should establish an ombudsman to rule on disputes between grocers and suppliers, after retailers failed to agree a voluntary arrangement.

The CC has set out a Groceries Supply Code of Practice (GSCOP) – its formal recommendation to the Department for Business, Innovation and Skills (BIS). It has given grocers six months to comply.

The move follows a two year investigation into the grocery sector, and the CC said the code was needed following complaints of bullying from suppliers. Most grocers opposed the creation of an ombudsman, saying it would create an unnecessary and costly layer of bureaucracy.

Those in favour of the ombudsman, however, included Waitrose and Aldi.

The CC does not have the power to establish an ombudsman itself, so had been trying to secure the agreement of retailers. It made clear it would recommend the change to BIS if they could not agree, so is now pressing ahead.

CC chairman Peter Freeman said: “Our inquiry clearly revealed problems that require action and which, if left unchecked, would damage the consumer. We continue to believe that everyone’s interests – and that includes retailers – would be served by tackling a problem that has clouded the industry for many years now. The current economic difficulties if anything reinforce rather than reduce the need for action.

“Whilst some retailers have recognised this, regrettably the majority have not. We made every effort to persuade retailers of our case as it would be the quickest way to establish the ombudsman. We are now left with no alternative but to set out the new code of practice and recommend that BIS set up the ombudsman to oversee its operation.”

The CC said the costs of the ombudsman would be about £5m a year, including initial set-up costs, and it said this cost is modest compared with the annual turnover of £70bn in grocery supplies to retailers.

Topics