MPs are investigating ways to expand the role of Groceries Code Adjudicator Christine Tacon, amid fears that she has been a powerless spectator in relation to Sainsbury’s merger with Asda.
Yesterday the Environment, Food and Rural Affairs (EFRA) Committee called on environment secretary Michael Gove to grant new powers to the Adjudicator, to prevent the supermarket giants “dominating” the grocery market.
Gove said the concern was a “warning” to Asda and Sainsbury’s that they risked putting their suppliers out of business in demands for lower prices, although he stopped short of saying the government would act.
The Grocer can reveal supplier and farmer bodies have been calling strongly for an extension of the Adjudicator’s powers, with fears that the looming investigation by the Competition and Markets Authority (CMA) will be unable to do anything to protect suppliers, because its main priority is protecting the consumer.
In May Tacon told MPs on the committee she was powerless to intervene in the merger, despite a looming squeeze on suppliers if it goes ahead, because price negotiations were outside her remit.
Today EFRA Committee chair Neil Parish said: “We are looking at the role of the Groceries Code Adjudicator (GCA) in relation to this, and the extent of its current remit and powers.
“The proposed Sainsbury’s/Asda merger could have a significant impact on British farmers and suppliers.
“While we appreciate the need for retailers to remain competitive, we are concerned the merger may lead to one retailer dominating the market and putting pressure on growers and suppliers.”
Responding to questioning from the MPs over the merger, Gove said: “There are all sorts of efficiencies that bringing Sainsbury’s and Asda together could offer to a consumer, but you are right to issue a warning note not just to them, but in general.
“In an effort to demand from contractors lower and lower prices, you risk those contractors no longer being around in the future. We’ve seen it before in the provision of public services and one of the reasons the GCA was created was to ensure fairness in the supply chain.
“The system isn’t perfect everywhere - dairy is an area of particular concern considering the issues we’ve had in the past. In the medium to long term, farmers including dairy farming recognise there is strength in being part of a good co-operative and there’s also strength in thinking about diversification on where the milk might go. But in the short term, we must remain vigilant in order to make sure there aren’t things happening in retail to put undue pressure on primary suppliers.”
He added: “The role of the GCA is critical. Consumers overall are more and more conscious of where food comes from and more and more attuned to who they might shop with as a result. Cost and convenience are the most important factors, but I do think we can shine a light on those companies who may not necessarily be playing fair in the supply chain.”
The call from MPs follows demands by Labour last month for the adjudicator to be given new powers to step in to block the deal, or introduce draconian conditions.
The Grocer understands bodies including the NFU have also been putting pressure on ministers for such a move, as well as grocery suppliers.
One leading source said: “We believe that the Adjudicator’s office is woefully under-resourced.
“She is effectively ‘tinkering around the edges’ of retailer behaviour while, when it comes to a merger like this which would lead to a market-changing domination of suppliers, she is powerless to step in.
“We would very much welcome the intervention of the secretary of state and MPs to either increase the Adjudicator’s resources, or to have an additional adjudicator to cover the issue of market competition.”
The latest intervention by MPs comes on the same day it was revealed Sainsbury’s CEO Mike Coupe and his Asda counterpart Roger Burnley are to be hauled before the EFRA Committee to give evidence over the merger.
Nest week’s grilling is to focus on the reasons behind the merger and its potential impact on competition and jobs.
Judith Batchelar, director of Sainsbury’s brand, will also give evidence to MPs in the House of Commons next Wednesday (20 June).