Asda’s main ready meals supplier went public last week after being dropped in favour of Northern Foods and was poised to become the first company to have a complaint against a supermarket investigated under the code of practice.
It claimed that Asda had failed to give it the full 90 days’ notice of the axing of its contract, the amount of time legally required to negotiate redundancy packages.
But the OFT has thrown out the complaint. “If there was no written contract, there is no grounds for saying the terms were varied,” it said. “That’s why encouraging suppliers to draw up contracts was one of the key things to come out of our review of the code this year.”
Ferndale’s owner, John Bigwood, said: “Section two of the code requires that retailers give reasonable notice of variation of terms. But the OFT’s decision means if a supplier doesn’t have a written contract with a retailer, the code is irrelevant. So it applies to about 2% of suppliers.”
The OFT has said Ferndale could still go to mediation with Asda. The retailer has indicated it would be willing to do that and has given Ferndale more time to cease production, agreeing to phase out the contract within five and a half months.