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Toothless Tory 'ombudsman' won't solve supermarket problem

Caroline Lucas

8th December, 2010

It's high time we had a supermarket ombudsman, but it needs to be proactive and powerful, says Caroline Lucas

What farmer who relies on supermarkets for their livelihood will risk speaking out when they are likely to be delisted?

As we enter a general election period, food is officially back on the agenda – with both Labour and Tory environment ministers falling over themselves to make announcements setting out their vision for the future of our food.

For those who have long campaigned for fundamental changes to the UK’s food and farming policy, it has always been clear that the industrialised food system is completely unsustainable. It wreaks havoc on the natural world, harms local economies and small scale producers, encourages poor standards of animal welfare, and puts us at an ever increasing risk of food insecurity.

One of the most significant factors behind the food crisis currently on the horizon is the dominance of the large supermarket retailers, whose pile ‘em high ethos, wasteful packaging practices and cut-throat price wars have come to epitomise everything that is wrong with the way we produce and consume food.

The unacceptable power wielded by big supermarkets poses a serious threat to the future of our agriculture, and the Greens have been consistent in calling for tough new rules to protect producers, small businesses, rural economies and the environment. Meanwhile, the Government, in characteristic fashion, has failed to act decisively.

So it is encouraging to see the Tories at least waking up to the reality that something must be done, with their proposal for a supermarket ‘ombudsman’. But while this may be a step in the right direction, the plans revealed so far are noticeably light on detail.

Powerless?

There is little sign that the proposed regulatory body would have any real power to challenge the big business practices that dominate food retail. What’s more, the announcement seems to directly contradict other, more typically Tory, policy: Ken Clarke's pledge, for example, to reduce regulation on business.
 
Competition law is designed to protect us from monopolies – where there is only one seller but many buyers. Yet the big supermarkets also hold monopsonies; many sellers (such as farmers) and one buyer (the supermarket). As the only major purchaser of a product or service, the ‘monopsonist’ may dictate terms to its suppliers in the same manner that a monopolist controls the market for its buyers.
 
Between them, the Big Four – Tesco, Sainsbury’s, Morrisons and Asda – account for more than three quarters of the UK grocery market, meaning that farmers are largely dependent on them to sell their produce, and can also be forced into signing exclusive deals. This gives the retailers the power to dictate conditions and force down prices in order to increase their profit margins.

Reactionary

To protect both consumers and producers, we need a regulator with real powers to hold supermarkets to account – and with the proactive capacity to demand documentation from superstores showing how much they pay and how much they charge for goods. The shadow farming and environment spokesman Nick Herbert has described an ombudsman that will ‘investigate complaints from suppliers and arbitrate on disputes between supermarkets and producers’; in other words, a purely reactionary entity.

And in reality, what farmer who relies on supermarkets for their livelihood will risk speaking out when they are likely to be delisted? We know from our research at EU level that the system won't work if it relies on farmers to come forward. Without proactive powers, plus assurances that informers will be kept anonymous, an ombudsman will achieve nothing.

Sanctions

The issue of effective sanctions is also important; what powers will an ombudsman have if supermarkets break the Code of Practice being proposed at EU level? Following my Euro-Parliament campaign for a Commission investigation into supermarket dominance, the Commission's group on the competitiveness of the agro-food industry is investigating the need for such a code. It seems unlikely that a fine against a supermarket like Tesco, which in 2009 recorded an annual pre-tax profit of £3.1bn, would act as much of a deterrent. An effective ombudsman would, therefore, need to be able to impose strict sanctions that might affect a supermarket's future actions.
 
Moreover, without a wider commitment to fundamentally reforming the system of supermarket monopolies – via regulation to enforce an upper limit on each supermarket's fair share of the market, a ‘competition test’ to prevent saturation at a local level, and stronger planning policy – an ombudsman would be toothless. And as long as supermarkets are allowed to engage in price wars at the expense of producers, they will continue to force down prices and the profit margins for UK farmers will become even more untenable.

So while we welcome the Tories’ late recognition that something must be done about destructive supermarket practices, we need details on how the proposed ombudsman would work and what powers it would have. Without assurances that the problem will be tackled at its heart, this proposal looks like little more than an electioneering gimmick that would fail to achieve the necessary changes or, at worst, be dropped completely after the election.

Dr Caroline Lucas is Green Party MEP for the south-east of England. Her 2007 Written Declaration (like an Early Day Motion in the House of Commons) calls for a European Commission investigation into the dominance of the big supermarkets gained overwhelming support from fellow MEPs.

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