NFU Scotland has urged the Competition Commission to consider the consumer impact of the financial squeeze on supermarket suppliers. The Union was responding to the Competition Commission’s inquiry into the operation of the major supermarkets.

NFUS believes that the dominance of supermarkets in the grocery sector had led to them, in too many instances, abusing their power to the detriment of suppliers, farmers and, ultimately, consumers. NFUS has collected evidence from major suppliers of how supermarkets flout the Office of Fair Trading’s Code of Practice and has presented it to the inquiry.

Whilst the vast majority of farmers do not deal directly with supermarkets, the financial pressure on food and drink processors from the big retailers is being passed back to farmers in the form of unsustainable prices. As a result, the future supply of quality Scottish food is being jeopardised, with consumer choice set to suffer.

NFUS is calling for a strengthened Supermarket Code of Practice with the establishment of an independent auditor to police it and provide protection to suppliers who complain. Currently, no suppliers will complain at their treatment for fear of losing business.

NFUS President John Kinnaird said:

“This inquiry will focus on the consumer impact of the growth of supermarkets. It is therefore vital that it considers the effect of the mistreatment of supermarket suppliers and how that damages the whole food supply chain.

“The Competition Commission’s report six years ago warned that if abusive practices continued, suppliers would invest less on product development and that would result in lower quality and less consumer choice. I can assure the Commission that its fear was justified.

“Whilst there is no doubt that some supermarket and supplier relationships work well, it is also clear that some are shaped by fear. We know from speaking directly to supermarket suppliers that they are facing a destructive financial squeeze on their businesses. Yet, they are universally afraid to speak out for fear of losing business. Ultimately, it is consumers that will pay the price of this misuse of supermarket power; many direct suppliers and primary producers are receiving prices that don’t even cover their costs. It is unacceptable that at a time of increasing consumer demand for local, high quality food, that its supply is being jeopardised by a damaging dominance of the grocery market.

“Six years ago, the competition authorities recognised the need for a Supermarket Code. It was a laudable project, but one which has failed. It must now be strengthened and, crucially, it requires independent and proactive enforcement, with protection for suppliers who complain at their treatment. All we need is for the Code to do what it was supposed to do all along. We are realistic enough to know that this will not change the climate of fear within the supply chain overnight. However, it would be a crucial first step to rebuilding trust and providing a desperately needed check in a system.”

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