Select Committee on Welsh Affairs Minutes of Evidence



Supplementary memorandum submitted by the National Farmers Union Wales (FUW)

 

COMPETITION COMMISSION REPORT ON SUPERMARKETS CODE OF PRACTICE ON RELATIONSHIPS WITH SUPPLIERS

  NFU Cmyru—Wales welcomes the opportunity to comment on the draft Code of Practice on Relationships with Suppliers and wishes to thank you for the extension to the consultation deadline in light of the current farming crisis.

  Having carried out limited consultation with our members, we are now able to make the following comments:

INTRODUCTION

  NFU Cymru—Wales welcomes the concept of a Code of Practice to apply to the top five supermarkets subject to the comments below. However, we see no reason why the Code should not be applied to all supermarkets. Indeed, a number of our members feel that trading relationships with some of the smaller supermarkets can be just as demanding. NFU Cymru—Wales also wishes to stress that this Code of Practice should be used as a template for all trading relationships between buyers and sellers. There are many cases where the smaller producers do not supply retailers but do supply processors or packers who exercise undue buying power comparative to those of the retailers. The Code states that the Competition Commission does not wish to inhibit mutually beneficial arrangements genuinely entered into by supermarkets and their suppliers. If this is true, NFU Cymru—Wales would question why consultation with supplier representatives was not sought earlier.

 

  We do of course accept that retailers are free to decide who they wish to do business with and recognise that the terms offered by suppliers will influence this decision. However, we do not believe that it follows from this that retailers should be free to impose unreasonable terms on suppliers. The Competition Commission's Remedies Statement dealt with a number of important issues under this heading, prohibition on retailers interfering with suppliers' other business activities. We believe that it is essential that both of these should feature in the final Code of Practice.

COMMENTS ON THE PROVISION OF THE CODE

Part 1—Standard Terms of Business

  2.  The term "reasonable" is stated throughout the Code. It is clear that this must be a reflection of the nature of the suppliers' business eg a growing season which could be up to six months would be deemed reasonable by a horticulture supplier and not by a non-perishable supplier.

  3.  It is essential for the term "reasonable" in this context to be clarified. We would suggest that a supermarket shall pay a supplier for products delivered to that supermarket's specification no more than one month after the date of that supplier's invoice.

Part 2—Prices and Payments

  4.  It is stated that products are "made". This is a dubious concept in agriculture and we would seek further clarification on this term for the primary agriculture sector eg is this when the product is sown, harvested or packed.

  5.   No obligation to contribute to marketing costs

    (a)  Suppliers should not be expected to pay costs towards any buyers visits.

    (b)  We would seek clarification that hospitality includes charity donations.

  6.   No payments for lower profits unless the basis of payment is agreed in advance

  Again we would seek further clarification as to the term "product is made" when referring to the agricultural sector.

  NFU Cymru—Wales does not believe that any primary agricultural supplier is willing to pay compensation to a supermarket when profits from the sale are lower than expected. For this reason, we would seek to remove the caveat "unless the basis of such payment is agreed in writing between that supermarket and that supplier before the relevant supplies of that product are made".

  7.   No payments for wastage without prior agreement, negligence or default

  A supplier should not be required to make a payment to cover any wastage of that supplier's products goods or indeed any other supplier's products incurred at that supermarkets stores.

  8.   Limited circumstances for lump sum payments as a condition of being a supplier

  Any payment of this nature must be made with the prior agreement of the supplier.

  We would seek further clarification as to whether new products should not be stocked throughout the whole of the proceeding 365 days or at one point in time during the 365 days.

  9.   No lump sum payments for better positioning of goods unless in relation to promotions

  Any payment of this nature must be made with the prior agreement of the supplier.

PART 3—PROMOTIONS

  11.   Due care to be taken when ordering for promotions

  We would seek further clarification on what is deemed "taking due care" when ordering products from a supplier at a promotional wholesale price.

  15.   Limited circumstances for compensation for erroneous forecasts

  Any losses incurred due to a forecasting error and prepared in good faith and due care, should be shared between supplier and supermarket and agreed in writing.

PART 5—CONSUMER COMPLAINTS

  16-18.   No unjustified payment for consumer complaints

  These conditions are largely endorsed. However, we would expect the full report about the complaint from supermarkets to supplier to include product traceability details and a breakdown of the costs incurred.

  17b.  The supermarket should verify and agree with the supplier that the consumer complaint is justifiable and attributable to a failing on the part of that supplier.

  19.  NFU Cymru—Wales believes that part B of this clause should be deleted. It should be of no consequence to a retailer, the price the supplier pays for third party goods, services or property.

PART 7 STAFF TRAINING

  NFU Cymru—Wales believes that annual training and refresher courses should be given to all new and existing buyers.

PART 8 GENERAL

  24.  NFU Cymru—Wales strongly feels that if a supermarket shall at its own expense offer the services of a mediator to assist in disputes, the independence of that mediator will be questioned. We would seek that the mediator should be jointly selected by the supplier and the supermarket.

  In addition, NFU Cymru—Wales believes that the rulings of the mediator should be published and in a form which will enable potential precedents to be established.

  Failing an agreement of a mediator between the supermarket and supplier, the decision should be progressed to an independent body eg Centre for Dispute Resolution.

  28.  No amendments without consent of Director

  It is imperative that the Code should not be amended without the prior consent of the Director and supermarkets and without the agreement of suppliers.

INTERPRETATION

Groceries

  NFU Cymru—Wales believes that plants and flowers should be included in the Code of Practice. Our membership is comprised of growers supplying supermarkets with these products.

  Indeed all supermarkets buy plants and flowers in the same way as fruit and vegetables as can be seen from their inclusion in the EUREP (European Food Retailers and Their Partners) Code of Good Agricultural Practice. In an increasing market and for these reasons we cannot see why this sector should not be included.

The Mediator

  The mediator should not only be independent but also suitably qualified.

MARK UP OF PRICES

  Reference was made to the sale direct from farm to a major retail outlet of swedes.

  The swedes consigned and delivered washed and netted to the supermarket in 28lb nets were realising 2.60 at farmgate and being retailed for 14.10, a mark-up of 442 per cent for merely conveying from store to supermarket shelf.

Mary James

Deputy Director

Head of Policy NFU Cmyru

10 December 2001

 


 
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