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New regulator to monitor supermarket supply disputes

Published:  23 July, 2008

The Competition Commission has proposed the creation of a new ombudsman to monitor disputes arising between supermarkets and their suppliers.

The new regulator will have the power to award compensation and police a tougher version of the Supermarket Code of Practice.

The new code will be widened to include all grocers with turnover greater than 1bn.

Supermarkets will have to appoint compliance officers to make sure the code is adhered to.

Supermarkets will also be stopped from imposing restrictions on who can build on land that they sell off.

There will also be a five-year time limit on agreements between supermarkets and local councils that prevent rivals opening nearby.

But there will be no forced sales of stores or land.

Interested parties now have two weeks to comment on the recommended remedies before the final report is published in April.

The proposed package of remedies includes:

A recommendation to the relevant government departments that a competition test' should be introduced when local planning authorities are assessing planning applications for new large grocery stores. The OFT would act as a statutory consultee to the local planning authority to carry out the test.

A requirement for grocery retailers to release existing restrictive land covenants, which have the effect of preventing that land being used for competing stores, in areas of high concentration.

A ban on the imposition of future restrictive covenants which have as their object or effect a restriction on grocery retail use.

A requirement on grocery retailers to lift existing exclusivity arrangements that have been in place for more than five years, where these have been identified as a barrier to entry by a competing retailer in areas of high concentration.

A requirement on grocery retailers (and a recommendation to local authorities) not to enter into or enforce any exclusivity arrangements of this kind in the future for longer than five years.

A recommendation to the Department for Business, Enterprise and Regulatory Reform (BERR) that the Land Agreements Exclusion Order be amended so that agreements which restrict grocery retailing should no longer benefit from exclusion from the Competition Act.

The creation of a new Groceries Supply Code of Practice (GSCOP) to replace the existing Supermarkets Code of Practice (SCOP), which will be extended to include all grocery retailers with a UK turnover greater than 1 billion.

The new Code, whilst including much of the existing SCOP, will prohibit retrospective changes to agreed terms of supply and also require retailers to make further improvements to their dealings with suppliers through the appointment of an in-house code compliance officer, keeping better records of contracts with suppliers and automatic notification to suppliers of contractual terms and their right to complain and seek arbitration of disputes.

A recommendation to establish an ombudsman to arbitrate on disputes under the GSCOP, with the power to gather information following complaints from suppliers and primary producers and proactively investigate breaches of the GSCOP.