COMPETITION
COMMISSION News Release (20/09) issued by COI News Distribution
Service on 28 April 2009
The Competition
Commission (CC) is now consulting publicly on draft Undertakings
to establish an Ombudsman to arbitrate on disputes between
retailers and suppliers and investigate complaints under the new
Groceries Supply Code of Practice (GSCOP).
In February this year, the CC published a draft Order for
consultation, which will see the creation of a new strengthened
and extended GSCOP, and is now considering responses before
finalizing it. Unlike with the GSCOP, the CC does not have the
power to establish an Ombudsman itself, so this will require the
agreement of retailers. If retailers do not sign up to the
Undertakings, then the CC will recommend to the Department for
Business Enterprise and Regulatory Reform (BERR) that it takes
steps to establish the Ombudsman instead.
The Undertakings, which are available at http://www.competition-commission.org.uk,
and Order follow the CC's inquiry into UK groceries retailing
last year. This concluded that measures were needed to address its
concerns about relationships between retailers and their suppliers
as well as to improve competition between retailers in local areas.
Peter Freeman, CC Chairman and Chairman of the Groceries Inquiry
said: Our report last year uncovered significant evidence of
problems in the way retailers deal with their suppliers, which, if
left unchecked, will ultimately harm consumers' interests. We
remain convinced, as we were then, that a more robust system to
tackle some of these practices and resolve disputes is essential.
Whilst the strengthened Code of Practice is a major step in the
right direction, we believe that the creation of an independent
Ombudsman is necessary to restore confidence amongst suppliers
that there is an objective person looking into disputes and
complaints. It is in everyone's interests to have a system in
place in which all parties can have faith.
We do require the agreement of retailers to establish the
Ombudsman and we are fully aware that some have expressed their
opposition. However, we have a duty to make every effort to see if
we can introduce the Ombudsman scheme with their consent, which is
why we are now publicly consulting on it. In addition, given the
high level of interest from the industry and wider public, we feel
it is right that all those, in favour or against, should be
putting their views on the record.
Our report clearly demonstrated problems that require action.
Retailers with good relationships with their suppliers have
nothing to fear from this and we think that the modest costs
involved would be more than justified in tackling an issue that
has clouded the industry for several years now. The difficult
economic circumstances at present would seem to underline the need
for an Ombudsman, rather than remove it. I invite retailers to
accept the logic of this position and to give the undertakings we
have proposed.
The Ombudsman would be appointed by the Office of Fair Trading
(OFT), which would also set an annual budget for costs and
expenses. These costs will be reimbursed from retailers using a
formula which will take into account the size of retailers as well
as the number of complaints involving them and requiring resolution.
The overriding objective of the Ombudsman will be to undertake
investigations and arbitrate disputes arising from GSCOP to
promote the interests of consumers. Its principal duties will be:
* to act as an arbitrator between Designated Retailers and
Suppliers in relation to Disputes arising under the Code;
* to receive complaints in relation to a breach of the Code, and
where appropriate to conduct Investigations;
* to publish guidance on specific provisions of the Code and the
Scheme when necessary;
* to make recommendations to Designated Retailers on how to
improve compliance with the Code and to monitor progress on the
implementation of such recommendations; and
* to advise and report to the OFT on the operation of the Scheme
and the Code. The CC has also today published a draft order
outlining measures to prevent exclusivity arrangements and
restrictive covenants being used by grocery retailers to restrict
entry by competitors in order to improve competition in local
areas. The CC has also published a provisional recommendation to
the OFT on the choice of software to be used to determine the area
covered by each local market. These documents are also available
at http://www.competition-commission.org.uk.
In addition, the CC has renewed work on the 'competition
test' following the successful challenge by Tesco in a case
heard before the Competition Appeal Tribunal (CAT) in November
2008. On 3 April 2009, the CAT 'remitted' the matter
back to the CC in order for it to carry out further work and
analysis to address the CAT's concerns over some issues
related to the introduction of the test.
Notes for editors
1. Under the Enterprise Act 2002 the Office of Fair Trading (OFT)
can make a market investigation reference to the CC if it has
reasonable grounds for suspecting that competition is not working
effectively in that market.
2. The inquiry was referred by the OFT on 9 May 2006. This market
investigation reference followed an initial OFT study into the
sector and public consultation. The CC published its final report
on 30 April 2008. See news release at: http://www.competition-commission.org.uk/press_rel/2008/apr/pdf/14-08.pdf.
3. The members of the Inquiry Group are: Peter Freeman (Group
Chairman), Jayne Almond, Barbara Donoghue, Alan Gregory, Alan
Hamlin and Bruce Lyons.
4. Further information on the CC and its procedures, including
its policy on the provision of information and the disclosure of
evidence, can be obtained from its website at: http://www.competition-commission.org.uk.
5. Enquiries should be directed to Rory Taylor (email
rory.taylor@cc.gsi.gov.uk) on 020 7271 0242.