Traidcraft on the Groceries Code Adjudicator Bill
Campaigners answer questions about the Bill.
A number of organisations, including Ethical Consumer, are currently campaigning for the introduction of a code of conduct for supermarkets and an independent adjudicator to enforce the rules. They believe that this will benefit consumers and suppliers alike. The bill was recently mentioned in the Queen's Speech and activists are hopeful that the idea will be passed into law in the coming year.
Below, Traidcraft, one of the driving forces behind the campaign, answers some questions on the latest developments.
What stage is the campaign at?
This month the Government used the Queen’s Speech to announce that it would bring a bill to set up a watchdog (the Groceries Code Adjudicator) into parliament. We have welcomed these developments but are still calling for the Government to set the body up as quickly as possible, with all the powers it needs, to tackle abusive trading practices by supermarkets.
We have however been campaigning on this issue for some time. in 2008 the Competition Commission issued its final report which found that supermarkets ‘transfer excessive risks and unexpected costs’ onto their suppliers and recommended that an updated code of practice, with a body to monitor and enforce this code, be set up. Traidcraft has since campaigned for these recommendations to be implemented; in February 2010 the updated Groceries Code was put into place.
Supermarkets are doing very well - why aren't their suppliers?
Put simply, the real cost of the supermarkets price wars is being passed onto suppliers in developing countries and in the UK. The Adjudicator is the first important step in providing the people that pick, pack and grow our food with a route to recourse against supermarket abuse. This also an important precedent for tougher supermarket regulation throughout Europe.
Supermarkets are experiencing high profits in part because they are able to push costs back onto their suppliers. The big four supermarkets (Asda, Morrison’s, Tesco’s and Sainsbury’s) control over 75% of the grocery market – supermarkets therefore have enormous power over suppliers wanting to reach this market. They can dictate terms and change agreements to suit their profit margin. This can mean longer hours, lower pay and poor working conditions for workers as suppliers try to meet these demands. If a supplier wants to raise a complaint about this, they risk losing business from the supermarkets and access to the lucrative UK market.
Why is an independent watchdog to enforce the rules so important?
An earlier Competition Commission report, published in 2000, recommended a monitoring and enforcement body to put a stop to unfair commercial practices by supermarkets. But the retailers in question argued (successfully) that a voluntary code was sufficient. However the Competition Commission’s subsequent reports showed that abusive trading practices had continued unabated and once again recommended an independent watchdog be set up. The delay in establishing the Adjudicator has already negatively impacted on compliance with the 2010 Groceries Code – an independent watchdog is an essential step in restoring fairer commercial relations between supermarkets and their suppliers, and has been a long time coming.
What powers do you envisage them having?
The Adjudicator should have all the powers it needs to monitor and enforce the Groceries Code and stop the transfer of excessive risks and unexpected costs as outlined by the Competition Commission. They should be able to launch an investigation into a breach of the Groceries Code on the basis of any credible evidence; for example this evidence could come from third parties such as trade associations to protect the anonymity of suppliers who fear reprisals from supermarkets if they come forward with a complaint. The Adjudicator should also have the power to fine supermarkets that breach the Groceries Code.
How will consumers benefit?
Without the Adjudicator there is a danger that suppliers to UK supermarkets will be less able to innovate. Suppliers face the threat of supermarkets reducing their margins to such an extent that they will be unable to recoup their investment – therefore they may choose not to offer UK supermarkets their better quality products. Also the demands placed on suppliers by supermarkets have forced many to go out of business; if there is no action prices could rise as with fewer suppliers competing for access to the UK grocery market. Consumers stand to benefit from being able to access a range of high quality products, at a range of prices, with the establishment of the Adjudicator.
How will suppliers / workers benefit?
Suppliers will be better able to plan; as a result there will be more opportunities to invest in training, innovation and longer term employment. This will then enable suppliers to enter into contracts with farms and factories which will also be able to operate in a more planned manner; for example, offering employment contracts which are not casual or short-term and workers not being forced to work overtime at very short notice.
Are the supermarkets on side or battling against it - are they asking for a voluntary code or similar? Why would this be bad?
The majority of the supermarkets that are covered by the updated Groceries Code are on the record as opposing an Adjudicator; at a parliamentary hearing last year a Sainsbury’s spokesman said the Government should let the Groceries Code ‘bed down – before going through the bureaucracy of a new adjudicator’. But the Competition Commission findings clearly show that the previous voluntary code of practice for supermarkets didn’t prevent their abusive trading practices, and this is why it recommended a dedicated monitoring and enforcement body be set up.
What’s next for the campaign?
Now that the bill to set up the Adjudicator is due to be passed in the current parliamentary session, our focus will turn to making sure the body has all the powers it needs to hold supermarkets to account; most importantly, the Adjudicator must have the power to fine supermarkets that breach the Groceries Code. A recent report by the British Institute of International and Comparative Law compared experiences of countries that have taken steps to address unfair commercial relationships and recommended implementing enforcement measures such as financial penalties. ‘Naming and shaming’ of supermarkets is insufficient.
What action do you want people to take?
Please sign up to receive Traidcraft campaign updates and we will keep you posted on the latest campaign actions you can take to make sure that the supermarkets watchdog has teeth. The supermarkets will be lobbying harder than ever against the watchdog having meaningful powers – it’s vital we mobilise to match that pressure.
Read more about Supermarkets in our comprehensive buyers' guide.