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December 4, 2012 3:56 pm
Large supermarkets that treat suppliers unfairly could face fines after ministers agreed to strengthen the powers of the sector’s new ombudsman.
The groceries code adjudicator, who will be named within weeks, will have the authority from next summer to prevent the 10 largest retailers unfairly putting the squeeze on their suppliers. The ombudsman, first announced in 2010, will be able to act against grocers if they retrospectively change contracts, put undue financial pressure on suppliers or charge them extortionate fees for stocking their products.
Jo Swinson, the competition minister, said on Tuesday that the adjudicator would be able to apply sanctions, including fines, if it found that retailers were breaching the groceries code and treating suppliers unfairly or unlawfully.
Retailers attacked the plans.
The government had been criticised by small businesses and farmers for failing to give the new entity enough teeth. Many suppliers believe they are treated unfairly by the big retailers who are accused of using their market position to drive down prices.
“Where supermarkets are breaking the rules with suppliers and treating them unfairly, the adjudicator will make sure that they are held to account,” Ms Swinson said.
“We expect fines to be used as a last resort but the fact that the adjudicator has the power to impose them will send a strong message to retailers that compliance with the code is not optional,” she said.
The size of the maximum fine will be decided by Vince Cable, the business secretary, after listening to the adjudicator.
The groups covered by the code of practice include all supermarket chains with turnover of more than £1bn, such as Tesco, Sainsbury’s, Marks and Spencer and Asda.
The British Retail Consortium, the trade body for store groups, said the government’s decision to give the adjudicator the power to impose fines “does not suggest the UK is the best place to do business”.
“This flies in the face of common sense and is yet another piece of disproportionate legislation aimed at food retailers,” said Stephen Robertson, director-general of the BRC. “It’s a major let-down.”
Mr Robertson said the power to impose fines was “unnecessary and heavy-handed and should be kept in reserve”.
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