Is Defra a better fit than the CMA for the Groceries Code Adjudicator?

The Groceries Code Adjudicator brought out its 13th annual survey this week, with the latest verdict from food suppliers on treatment by supermarkets.

But it’s unlucky 13 for those who believe the GCA’s role has proved effective at countering supermarket bullying and should not be tampered with.

Ministers announced last week that Adjudicator Mark White and his team were moving from the Department for Business & Trade to Defra, a move they say will boost fairness across the supply chain.

It follows persistent calls for the government to do more to protect farmers and growers, but does it risk the GCA’s effectiveness?

There has been scathing criticism of the “impotence” of the GCA to tackle pressure on farmers over prices such unfairness, with farmers facing what one MP last year called “obscene” pressure on prices. Moving the GCA to Defra was among 57 recommendations in former NFU president Minette Batters’ independent Farming Profitability Review in December. It also called for GSCOP’s current advisory rules over cost price increases – White’s so-called golden rules – to become law, begging the question of whether the government will act on that too, creating a more interventionist GCA.

Batters claims the ability of farmers to negotiate CPIs is fundamental to profitability and needs GSCOP teeth.

NFU president Tom Bradshaw says: “Moving the GCA role into Defra alongside the Agricultural Supply Chain Adjudicator reinforces a commitment by government highlighted within the Farm Profitability Review.

“It’s important they work closely together to foster a unified strategy that proactively addresses unfair practices. With the significant inflationary pressures being faced by farming and growing businesses driven by the energy crisis and war in the Middle East, this is a crucial time for supply chains to share the elevated risk.”

‘Shocking’ move

Yet many believe the GCA and GSCOP has succeeded in the past precisely because it has not been weighed down with huge layers of regulation, especially when it comes to deciding on commercial pricing issues.

“I was shocked when I saw it was moving into Defra,” says one leading source. “I think the GCA holds a lot more weight because of its close association with the CMA.

“Retailers are terrified of the CMA. They are hardly terrified of Defra. I can only assume the government wants to broaden the remit, but in doing so they will open an enormous can of worms.

“We are either in a free market economy or we aren’t,” adds the source. “In theory the GCA has always had the ability to recommend the CMA makes amendments to GSCOP. But the word back from the CMA has generally been ‘don’t even go there’ because it would mean they would have to effectively reopen an investigation of the inquiry that introduced the GCA in 2013.”

GSCOP negotiation expert Ged Futter, founder of The Retail Mind, also sees trouble ahead, including food inflation. “The problem lies in the word fair, because who gets to define what fair means?” he says.

“The Adjudicator’s role is not to decide what is fair and what isn’t. It has a very clear set of rules in GSCOP, and if you start changing that then there could be a whole set of unintended consequences, not least because if you have more ‘fairness’ in the supply chain, ultimately what that means is higher prices.”

Retailers say they are baffled at the government’s move and also indicate they would strongly resist new regulation, especially around prices.

“The key thing to remember is the GCA was set up to ensure consumer concerns on availability and product development were addressed,” says a retail source.

“It has very specific powers set out in regulations, including the Groceries Code Adjudicator Act, so any changes to its remit or operation would require legislation so we don’t believe this will change its approach.

“It is worth remembering the GCA’s latest report showed very high compliance rates with the code by retailers, and suppliers are reporting fewer problems.

British Brands Group CEO Tom Reynolds adds: “Policymakers have to remember that GSCOP addresses a specific economic issue: power imbalances between large retailers and suppliers that can lead to unfair behaviours to the detriment of the latter.

“As the worst of the pre-GSCOP behaviours fade in the rear-view mirror because of the superb work of the GCA, it would be easy for pressure to be applied by ministers and officials to move on to politically pressing challenges within their own brief. That would be a huge backward step.”

Farming bodies, in contrast, welcome the GCA’s move to a new home and hope it signals new powers

With the prospect of another wave of food price inflation dominating the industry’s thoughts, the prospect of a more interventionist GCA is bound to split opinion. Hence its move to Defra could prove to be one of its biggest challenges yet even compared with taking on the likes of Tesco and Amazon.