Are the three biggest supermarkets justified in resisting Competition Commission pressure to voluntarily establish an ombudsman?
Given the likelihood that BERR may impose it in the form recommended by the commission, their resistance may seem short-sighted. However, the retailers are worried their ability to compete in a low-growth and - next year - a low-inflation market will be impaired by the ombudsman model proposed by the commission. Assuming this model is open to negotiation, a workable compromise could be achievable.
The ombudsman's proposed right to receive confidential complaints from suppliers as a pretext for investigating retailers' trading practices looks to be a ready-made formula for regulatory creep. Given the reluctance of suppliers to complain openly and the commission's acceptance of the retailers' right to receive a copy of any formal complaint made to the ombudsman, the proposal would, in practice, become a whisperer's charter.
Extending this provision to include primary producers would increase the likelihood of misuse. It has long been commonplace for retailers to get the blame for anything processors do that upsets the farmers who supply them. More direct dialogue between farmers and retailers would be a big step forward, especially as many producers have only the vaguest notion of how value is added to their product beyond the farmgate.
It seems perverse, therefore, that the ombudsman is forbidden to do anything to facilitate 'coordination' among retailers or suppliers, for example encouraging dialogue between parties or disseminating best practice, which for decades has been the cornerstone of voluntary action to improve standards. This prohibition seems a prime example of competition policy gone mad.
A compromise solution must presumably be based on the general acceptance of an independent third party as guardian and interpreter of the new code of practice. Retailers have expressed a preference for the OFT to undertake this task, presumably because it's the devil they know. The tenor of recent OFT decisions in retailing cases, however, makes this preference hard to understand.
A wiser course would be to accept an ombudsman in principle and then reshape it in a way that offers a more balanced approach. The alternative is surely less attractive.
Kevin Hawkins is an independent retail consultant.
Given the likelihood that BERR may impose it in the form recommended by the commission, their resistance may seem short-sighted. However, the retailers are worried their ability to compete in a low-growth and - next year - a low-inflation market will be impaired by the ombudsman model proposed by the commission. Assuming this model is open to negotiation, a workable compromise could be achievable.
The ombudsman's proposed right to receive confidential complaints from suppliers as a pretext for investigating retailers' trading practices looks to be a ready-made formula for regulatory creep. Given the reluctance of suppliers to complain openly and the commission's acceptance of the retailers' right to receive a copy of any formal complaint made to the ombudsman, the proposal would, in practice, become a whisperer's charter.
Extending this provision to include primary producers would increase the likelihood of misuse. It has long been commonplace for retailers to get the blame for anything processors do that upsets the farmers who supply them. More direct dialogue between farmers and retailers would be a big step forward, especially as many producers have only the vaguest notion of how value is added to their product beyond the farmgate.
It seems perverse, therefore, that the ombudsman is forbidden to do anything to facilitate 'coordination' among retailers or suppliers, for example encouraging dialogue between parties or disseminating best practice, which for decades has been the cornerstone of voluntary action to improve standards. This prohibition seems a prime example of competition policy gone mad.
A compromise solution must presumably be based on the general acceptance of an independent third party as guardian and interpreter of the new code of practice. Retailers have expressed a preference for the OFT to undertake this task, presumably because it's the devil they know. The tenor of recent OFT decisions in retailing cases, however, makes this preference hard to understand.
A wiser course would be to accept an ombudsman in principle and then reshape it in a way that offers a more balanced approach. The alternative is surely less attractive.
Kevin Hawkins is an independent retail consultant.
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