Tenant Farmers' Association opinion: Time for the Retail Regulator to Get Some Teeth
PUBLISHED: 06:00 02 February 2015
The recent and well publicised report on dairy prices from the House of Commons Environment Food and Rural Affairs Select Committee has shone a light on the activities of the Groceries Code Adjudicator, Christine Tacon, latterly of Co-op Farms, writes George Dunn, chief executive of the Tenant Farmers' Association (TFA).
Established in June 2013, the adjudicator has the job to oversee the relationship between supermarkets and their suppliers to ensure that large supermarkets treat their direct suppliers lawfully and fairly.
In terms of what is lawful, there is a statutory code of practice in place governing the relationship between retailers and direct suppliers.
In reading the House of Commons report, one might be led to believe that the adjudicator has been doing a pretty bad job.
In fact it has become clear, as the TFA has been arguing for some time, that her limited powers are constraining her impact on ensuring fairness throughout the supply chain.
Although the official Government line is that there will not be a review of the adjudicator’s powers until 2016, answering a question on the current dairy crisis during Prime Minister’s questions on Wednesday, January 21, the Prime Minister went on record to say in relation to the adjudicator: “I also think it is time to look at whether there are ways in which its remit can be extended to make sure it looks at more of this vital industry”.
Following pressure from all sides, the Government has only just given the adjudicator the powers to fine retailers who are found to be in breach of the Groceries Code.
That fine can be up to as much as 1% of a retailer’s UK turnover which, should be a significant disincentive to bad practice. But what else needs to happen?
Firstly, the adjudicator must have the power to initiate own-initiative investigations. Currently the adjudicator is only able to act on complaints received.
In the same way that OFSTED has the powers to investigate the performance of schools on its own initiative and with very short notice, the same powers should be provided to the adjudicator to be able to investigate code compliance amongst retailers.
Secondly, the adjudicator needs to be given a role to look at the whole of the supply chain. Currently the rules surrounding the adjudicator allows for only direct supply contracts to be investigated.
Given that the vast majority of farm produce passes through a processor before it hits supermarket shelves the adjudicator is therefore unable to consider the impact of retailer activity on farmers where there is a processor in between.
This has been highlighted recently with some retailers driving down the price of milk to 89p for four pints which in turn has caused processors to reduce the price paid to farmers.
The TFA along with Farmers for Action has argued that this activity needs to be investigated by the adjudicator.
However, the adjudicator has refused to investigate partly on the basis that the complaint comes from an indirect supplier of the retailers rather than from the processors who have the direct relationship. This anomaly needs to be resolved.
Thirdly, whilst not wanting to give the adjudicator the power to fix prices, the adjudicator should have the powers to investigate and report on the balance of pricing throughout the supply chain to ensure that each of those involved in the supply chain from farmer through processor to retailer is receiving a fair level of benefit when prices are good or sharing in a fair level of the pain when prices fall.
This information will provide much needed transparency which will assist farmers and others in their negotiations with retailers.
Whilst low prices on supermarket shelves today might appear to be a good thing for consumers, if we lose a large part of our production base as a result, in the long term we will all be losers.