Ann Fitzgerald: More safeguards are needed against exploitation in the grocery sector
A discussion surrounding the introduction of a code of practice for grocery-goods undertakings is timely, given the allegation this week that Tesco is charging suppliers premia to stock their goods.
Earlier this month, a strengthened code of practice governing relations between grocery retailers and suppliers came into force in the UK.
In an ideal world, business and consumers would transact on an equal basis and both would take the legitimate interests of the other into consideration. However, this is not the case, and as society becomes more developed and complex, the process of addressing unfair commercial practices must develop at an equal pace.
The business-to-consumer relationship has been overhauled through the Unfair Commercial Practices Directive, under the Consumer Protection Act 2007. With the Consumer Rights Directive, which should be completed by mid-2011, it will safeguard against business exploiting this relationship.
In a business-to-business scenario, the situation can be different. There is a tendency to regard all businesses as equal in their contractual relationships with other businesses. In principle, they enjoy equal access to court redress for the resolution of disputes. The reality is different. A small business, be it a retailer or supplier, may be subjected to an unfair commercial practice with a larger entity by virtue of its unequal bargaining position.
The National Consumer Agency's proposal recommends the introduction of a general prohibition on unfair commercial practices between grocery undertakings to stop the transfer of excessive risk from one party to another.
Contractual arrangements between retailer and supplier should provide a fair degree of certainty to both sides. Suppliers should not have costs imposed on them unexpectedly or unfairly by retailers. The proposal includes a prohibition on many practices, along the lines outlined in the proposed code. This is very different to a protectionist stance, which does damage consumers, and is a mechanism to equalise the relationship between businesses to ensure fair play. Consumers will suffer if unfair commercial practices are left unchallenged.
Securing acceptable commercial practices across the grocery sector is challenging; but is worth pursuing. Ensuring a fair standard of trading will improve efficiency, competition and benefit consumers.
Ann Fitzgerald is CEO, National Consumer Agency