Supermarket ombudsman needed to ensure a fair market

Arundel & South Downs MP Nick Herbert has pledged to create a supermarket ombudsman to “curb abuses of power” by the major food retailers.

Speaking at the Oxford Farming Conference this morning (5 January), Mr Herbert said it was a move that will bring significant benefits to both farmers and consumers and would not cost the taxpayer a penny.

The creation of an ombudsman, who will investigate complaints from suppliers and arbitrate on disputes between supermarkets and producers, was recommended by the Competition Commission but the Government has so far failed to act.

The Shadow Environment Secretary also called for a "new age of agriculture" where farmers and producers are valued and given the backing they need to maintain the country's ability to feed itself.

Mr Herbert said: "The Government's belated recognition that food security matters will have little credibility after more than a decade in which they have devalued British agriculture and allowed domestic production to decline.

"It's not enough to talk loosely about a fair market or the need for better labelling.  We need action, with a supermarket ombudsman and legislation to enforce honest labelling if the retailers won't act.  It's meaningless to talk about a competitive agricultural industry while increasing the regulatory burden on farmers and failing to take the necessary action to deal with Bovine TB.

"For too long, farming has been treated by government at best as though it doesn't matter and at worst as an expensive problem.  The short-sighted response to the decades of food surplus was to believe that domestic production was no longer important.  But today we face the extraordinary new challenge of feeding a rapidly rising global population against a background of profound environmental change, and now even those who have been careless about farming can see that food production matters again."

Criticising the Government's lack of focus on farming, Mr Herbert said: "The last decade was characterised by the creation of a government department whose name didn't even mention farming or agriculture.  Now we are entering a new age of agriculture, where farming matters once more.  The goal must be to increase global production sustainably, feeding the world without depleting natural resources."

The MP added: "In this new age of agriculture, British farming has a bright future.  But that requires a new start, where government understands that we cannot take farmers closer to the market while undermining their ability to compete.  If we want to ensure food security in 2030 and beyond, we need to begin by valuing the agricultural industry that will deliver it."

Announcing that a future Conservative Government will create a supermarket ombudsman, set up as a dedicated unit in the Office of Fair Trading, Mr Herbert said:

"Supermarkets deliver real benefits but some aspects of the way they treat their suppliers can harm consumers as well as producers.  We have a new code of practice which outlaws unacceptable practices such as retrospective discounting, but this isn't worth the paper it is written on without effective enforcement.

"While the Government dithers the Conservatives are clear: we will introduce an ombudsman to curb abuses of power which undermine our farmers and act against the long-term interest of consumers.  As the Competition Commission has made clear, failure to do so could result in reduced investment by suppliers, lower product quality, and less product choice, with potentially higher prices in the long run.  It is time to act."

Ends

Notes for Editors

1. To listen to Nick Herbert's interview this morning on BBC Radio 4's Today programme, visit http://www.bbc.co.uk/iplayer/episode/b00pjpmp/Today_05_01_2010/ (starts 0:51:37).

2. The Competition Commission (CC) has formally recommended to the Department for Business, Innovation and Skills (BIS) that it should establish an Ombudsman to arbitrate on disputes between grocery retailers and suppliers and investigate complaints under the new Groceries Supply Code of Practice (GSCOP). BIS had been expected to announce its response to Parliament before Christmas but failed to do so. The Government's failure to establish an Ombudsman could result in reduced investment by suppliers, lower product quality, and less product choice, with potentially higher prices in the long run.

3. The aim of the new Groceries Supply Code of Practice is to ensure that suppliers do not have costs imposed on them unexpectedly or unfairly by retailers. The GSCOP, for example, prohibits retailers from making retrospective adjustments to terms and conditions of supply. These measures follow the CC's inquiry into UK groceries retailing which finished in April 2008 and concluded that measures were needed to address its concerns about relationships between retailers and their suppliers. There is broad agreement over the new Code but the CC is clear that an Ombudsman is required to oversee it. Both the Competition Commission and a subsequent report by Cardiff Business School concluded that the introduction of an Ombudsman is likely to provide significant consumer benefits. The final report by the Competition Commission, recommending the creation of an Ombudsman, can be viewed here: http://www.competition-commission.org.uk/rep_pub/reports/2008/538grocery.htm. The Cardiff Business School analysis on the consumer benefits of an Ombudsman is here: http://www.rogerclarke.org.uk/sitebuildercontent/sitebuilderfiles/finaldraftpdf.

4. The Conservatives are firm believers in the free market but there is a responsibility on the Government to ensure that markets work fairly. Practices such as retrospective discounting are unacceptable and ultimately to the detriment of consumers as well as producers. The Conservatives support the creation of an Ombudsman as a ring-fenced unit within the Office of Fair Trading (OFT), funded by a levy paid by the retailers. We would impose a cap on the size of businesses protected by the Ombudsman, to ensure that its focus is the protection of smaller producers, rather than multinational businesses which are often bigger than the supermarkets themselves. Our priority is an Ombudsman who is credible and effective and we do not wish to create another quango. For this reason we are not proposing to set up a new stand-alone body. The independence and specialism of the OFT makes it ideally suited to take on this role, and because the new Ombudsman would be industry-funded, it would not place a new burden on the OFT's existing budget or the taxpayer in general.

5. For more information about the Oxford Farming Conference, visit http://www.ofc.org.uk/.