Competition Commission
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CC consults on Ombudsman plan
The Competition Commission (CC) is now consulting publicly on draft Undertakings to establish an Ombudsman to arbitrate on disputes between retailers and suppliers and investigate complaints under the new Groceries Supply Code of Practice (GSCOP).
In February this year, the CC published a draft Order for consultation, which will see the creation of a new strengthened and extended GSCOP, and is now considering responses before finalizing it. Unlike with the GSCOP, the CC does not have the power to establish an Ombudsman itself, so this will require the agreement of retailers. If retailers do not sign up to the Undertakings, then the CC will recommend to the Department for Business Enterprise and Regulatory Reform (BERR) that it takes steps to establish the Ombudsman instead.
The Undertakings, which are available at http://www.competition-commission.org.uk, and Order follow the CC's inquiry into UK groceries retailing last year. This concluded that measures were needed to address its concerns about relationships between retailers and their suppliers as well as to improve competition between retailers in local areas.
Peter Freeman, CC Chairman and Chairman of the Groceries Inquiry said: Our report last year uncovered significant evidence of problems in the way retailers deal with their suppliers, which, if left unchecked, will ultimately harm consumers' interests. We remain convinced, as we were then, that a more robust system to tackle some of these practices and resolve disputes is essential.
Whilst the strengthened Code of Practice is a major step in the right direction, we believe that the creation of an independent Ombudsman is necessary to restore confidence amongst suppliers that there is an objective person looking into disputes and complaints. It is in everyone's interests to have a system in place in which all parties can have faith.
We do require the agreement of retailers to establish the Ombudsman and we are fully aware that some have expressed their opposition. However, we have a duty to make every effort to see if we can introduce the Ombudsman scheme with their consent, which is why we are now publicly consulting on it. In addition, given the high level of interest from the industry and wider public, we feel it is right that all those, in favour or against, should be putting their views on the record.
Our report clearly demonstrated problems that require action. Retailers with good relationships with their suppliers have nothing to fear from this and we think that the modest costs involved would be more than justified in tackling an issue that has clouded the industry for several years now. The difficult economic circumstances at present would seem to underline the need for an Ombudsman, rather than remove it. I invite retailers to accept the logic of this position and to give the undertakings we have proposed.
The Ombudsman would be appointed by the Office of Fair Trading (OFT), which would also set an annual budget for costs and expenses. These costs will be reimbursed from retailers using a formula which will take into account the size of retailers as well as the number of complaints involving them and requiring resolution.
The overriding objective of the Ombudsman will be to undertake investigations and arbitrate disputes arising from GSCOP to promote the interests of consumers. Its principal duties will be:
* to act as an arbitrator between Designated Retailers and Suppliers in relation to Disputes arising under the Code;
* to receive complaints in relation to a breach of the Code, and where appropriate to conduct Investigations;
* to publish guidance on specific provisions of the Code and the Scheme when necessary;
* to make recommendations to Designated Retailers on how to improve compliance with the Code and to monitor progress on the implementation of such recommendations; and
* to advise and report to the OFT on the operation of the Scheme and the Code. The CC has also today published a draft order outlining measures to prevent exclusivity arrangements and restrictive covenants being used by grocery retailers to restrict entry by competitors in order to improve competition in local areas. The CC has also published a provisional recommendation to the OFT on the choice of software to be used to determine the area covered by each local market. These documents are also available at http://www.competition-commission.org.uk.
In addition, the CC has renewed work on the 'competition test' following the successful challenge by Tesco in a case heard before the Competition Appeal Tribunal (CAT) in November 2008. On 3 April 2009, the CAT 'remitted' the matter back to the CC in order for it to carry out further work and analysis to address the CAT's concerns over some issues related to the introduction of the test.
Notes for editors
1. Under the Enterprise Act 2002 the Office of Fair Trading (OFT) can make a market investigation reference to the CC if it has reasonable grounds for suspecting that competition is not working effectively in that market.
2. The inquiry was referred by the OFT on 9 May 2006. This market investigation reference followed an initial OFT study into the sector and public consultation. The CC published its final report on 30 April 2008. See news release at: http://www.competition-commission.org.uk/press_rel/2008/apr/pdf/14-08.pdf.
3. The members of the Inquiry Group are: Peter Freeman (Group Chairman), Jayne Almond, Barbara Donoghue, Alan Gregory, Alan Hamlin and Bruce Lyons.
4. Further information on the CC and its procedures, including its policy on the provision of information and the disclosure of evidence, can be obtained from its website at: http://www.competition-commission.org.uk.
5. Enquiries should be directed to Rory Taylor (email rory.taylor@cc.gsi.gov.uk) on 020 7271 0242.
