Ten months after the Competition Commission's groceries market inquiry was concluded, why has so little changed, asks Ronan Hegarty
In an exclusive interview with The Grocer last May, the Competition Commission's Peter Freeman admitted he would have liked more time to investigate the groceries market but that his main priority was to put the remedies into practice.
Yet 10 months after the inquiry ended, one of those remedies - the competition test - has been killed off by Tesco's Competition Appeals Tribunal victory. Meanwhile, an order outlawing the development of restrictive covenants - due to be published last month - has yet to emerge. That leaves the revised Groceries Supply Code of Practice the only remedy enacted so far and that will prove pretty toothless if the proposed ombudsman fails to materialise. So why haven't Freeman's fixes hit the mark?
Perhaps the biggest problem remains the credibility, or lack thereof, of the inquiry itself. Given its conclusion that the industry was doing a pretty good job, many in the industry felt a long list of draconian remedies was unnecessary.
The British Retail Consortium, which opposed the need for a revised code of practice and is against an ombudsman, argues the inquiry was not worth the time, effort or estimated £200m in costs and that the repercussions, namely the proposed remedies, continue to be a pointless drain on resources.
"We welcomed the findings that the industry was delivering for consumers, and we said a year ago that should be the end of it," says a BRC spokesman. "It's frustrating that it has taken huge amounts of time and money from the retail sector - and continues to do so."
Frustration is a word used on both sides of the argument. Even the commission concedes the length of time it is taking to implement the remedies is "frustrating".
"But we are trying to put measures in place that will have a long standing effect for years to come," says a commission spokesman. "We have to get them right and that means designing them properly and consulting properly."
This is more important than trying to rush remedies out, he says. In terms of the ombudsman, this means giving retailers every chance to reach an agreement, rather than referring it to Government.
The introduction of an enforcement body to oversee retailers' relationships with their suppliers - perhaps the most significant development to have emerged from the two-year-long inquiry - therefore remains on hold, much to the annoyance of the supply side of the industry. "Our frustration is not with the commission necessarily," says British Brands Group director John Noble. "It's the fact that we have been waiting since 2002 and the original code of practice for a proper enforcement mechanism."
Noble acknowledges that without proper enforcement the new code of practice will be as toothless as its predecessor. "We have known for eight years that a light touch solution does not work."
He dismisses claims by the BRC and some of its leading members - including Asda - that an ombudsman will put undue financial pressure on retailers , forcing them to increase prices for consumers.
"It is more important than ever in the current economic conditions that we have an ombudsman in place," he argues. "It is simply not the case that it will it end up costing consumers. It is much more likely that costs will be passed back to suppliers than shoppers. They have to understand that there isn't a no-cost option. If there isn't going to be an ombudsman, the task will be taken up by the OFT to the same standard, with the cost then being paid by the taxpayer."
The arguments will no doubt continue to rage until the remaining remedies have been enacted. The question is: when will that be? If things continue to drag, the industry faces the very real prospect of events being overtaken by another inquiry in six or seven years time. Pretty galling when the CC inquiry report claimed the sector was "in many respects delivering a good deal for consumers". n
In an exclusive interview with The Grocer last May, the Competition Commission's Peter Freeman admitted he would have liked more time to investigate the groceries market but that his main priority was to put the remedies into practice.
Yet 10 months after the inquiry ended, one of those remedies - the competition test - has been killed off by Tesco's Competition Appeals Tribunal victory. Meanwhile, an order outlawing the development of restrictive covenants - due to be published last month - has yet to emerge. That leaves the revised Groceries Supply Code of Practice the only remedy enacted so far and that will prove pretty toothless if the proposed ombudsman fails to materialise. So why haven't Freeman's fixes hit the mark?
Perhaps the biggest problem remains the credibility, or lack thereof, of the inquiry itself. Given its conclusion that the industry was doing a pretty good job, many in the industry felt a long list of draconian remedies was unnecessary.
The British Retail Consortium, which opposed the need for a revised code of practice and is against an ombudsman, argues the inquiry was not worth the time, effort or estimated £200m in costs and that the repercussions, namely the proposed remedies, continue to be a pointless drain on resources.
"We welcomed the findings that the industry was delivering for consumers, and we said a year ago that should be the end of it," says a BRC spokesman. "It's frustrating that it has taken huge amounts of time and money from the retail sector - and continues to do so."
Frustration is a word used on both sides of the argument. Even the commission concedes the length of time it is taking to implement the remedies is "frustrating".
"But we are trying to put measures in place that will have a long standing effect for years to come," says a commission spokesman. "We have to get them right and that means designing them properly and consulting properly."
This is more important than trying to rush remedies out, he says. In terms of the ombudsman, this means giving retailers every chance to reach an agreement, rather than referring it to Government.
The introduction of an enforcement body to oversee retailers' relationships with their suppliers - perhaps the most significant development to have emerged from the two-year-long inquiry - therefore remains on hold, much to the annoyance of the supply side of the industry. "Our frustration is not with the commission necessarily," says British Brands Group director John Noble. "It's the fact that we have been waiting since 2002 and the original code of practice for a proper enforcement mechanism."
Noble acknowledges that without proper enforcement the new code of practice will be as toothless as its predecessor. "We have known for eight years that a light touch solution does not work."
He dismisses claims by the BRC and some of its leading members - including Asda - that an ombudsman will put undue financial pressure on retailers , forcing them to increase prices for consumers.
"It is more important than ever in the current economic conditions that we have an ombudsman in place," he argues. "It is simply not the case that it will it end up costing consumers. It is much more likely that costs will be passed back to suppliers than shoppers. They have to understand that there isn't a no-cost option. If there isn't going to be an ombudsman, the task will be taken up by the OFT to the same standard, with the cost then being paid by the taxpayer."
The arguments will no doubt continue to rage until the remaining remedies have been enacted. The question is: when will that be? If things continue to drag, the industry faces the very real prospect of events being overtaken by another inquiry in six or seven years time. Pretty galling when the CC inquiry report claimed the sector was "in many respects delivering a good deal for consumers". n
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