Lord Mandelson should reject this interventionist and unnecessary role, says Kevin Hawkins
So Birnam Wood has finally staggered up to Dunsinane and it's now Lord Mandelson's decision to crown the ombudsman or kick him out.
The upgraded code of practice, GSCOP, will inject more formality, certainty and cost into supply terms. Enforcement, however, will if the Commission gets its way be the task of an ombudsman who will have two separate functions. The first is to provide independent arbitration to settle retailer-supplier disputes. This is a sensible proposal although in practice most disputes are likely to be resolved at a much lower level. The Commission also admits that arbitration could be provided by other means.
The second, 'proactive' function is to receive confidential complaints from suppliers, producers and other intermediaries that, if it suggests a pattern of nonconforming behaviour on the part of one or more retailers, could trigger an investigation. The identity of the complainants would still, however, remain secret. So much for the transparency the Commission says it wants to foster. As a previous OFT report has pointed out, relying on anonymity as a basis for potentially punitive action is contrary to natural justice.
As a piece of primary legislation (assuming the government finds time for it in its dying days) the ombudsman is flawed. A core principle of good regulation is that remedies should be proportionate to the risks involved. The interventionist role proposed for the ombudsman implicitly assumes that once the GSCOP is in force, retailers will ignore or try to subvert it. Yet in successive surveys on the implementation of GSCOP, the OFT reported the big four were complying with its terms and it was the suppliers' refusal to engage that negated it.
There are no grounds for believing the additional retailers to be covered by GSCOP will do anything other than comply with it. Should any of them fail to do so, their actions would quickly find their way into the public arena and the OFT could then investigate if it wished.
This is the third competition inquiry in the past 10 years into what is arguably the most efficient, consumer-friendly industry in the UK. Contrast this meddling with the latitude allowed the customer-averse, bonus-happy banks and competition policy looks silly. The ombudsman has had far more than his hour on the stage. Let him now be gone and heard of no more.n
Kevin Hawkins is an independent retail consultant