New supermarkets ombudsman may not start work until 2013

Ministers are poised to publish a draft Bill which would give a new supermarket ombudsman powers to prevent Britain's 10 biggest grocers from bullying their suppliers.

However, the legislative timetable means that the watchdog, to be known as the Groceries Code Adjudicator (GCA), will probably not begin work until the summer of 2013 – more than five years after a landmark Competition Commission inquiry recommended the measure.

The delay has dismayed suppliers' groups such as the National Farmers Union. It is concerned that, while the Government introduced a Groceries Supply Code of Practice (GSCOP) in February last year, there has been no one to police it since then.

Nick von Westenholz, the NFU's government affairs adviser, described the delay in introducing the GCA as "really disappointing".

"If we don't get anything until the middle of 2013, we are looking at three years of having this regime up and running without having anyone to enforce it," he said.

The ombudsman will be able to take action against big grocers if, for example, they put unwarranted financial pressure on suppliers, make retrospective changes to contracts or charge suppliers prohibitive fees for stocking their products in stores.

A draft Bill setting out the terms of reference for the GCA, which will be based at the Office of Fair Trading, is circulating in Westminster and the Department for Business, Innovation and Skills is expected to publish it later this month. But the Government has already backtracked on two earlier publication schedules.

Most recently, on 31 March, the Business Minister, Ed Davey, said: "I had hoped to publish it before Easter, but now I expect that publication will happen soon after Easter."

He said the Coalition hoped to introduce a "final Bill" in the second session of Parliament. But this does not start until May next year, which means legislation will probably not be introduced until the summer of 2012. The GCA is thus not expected to start work until the summer of 2013, though further delays cannot be ruled out. Government sources blamed a "busy" legislative schedule for the slow progress.

Last year, the Government said the GCA would not initially fine supermarkets that breached the new code of practice, which applies to the 10 companies with turnover in excess of £1bn: Tesco, Asda, Sainsbury's, Morrisons, Waitrose, Marks & Spencer, Aldi, Lidl, Iceland and the Co-op.

Instead, ministers will "name and shame" those grocers that breach the rules, believing that lost sales and a damaged reputation among the public is a bigger penalty for supermarkets to pay.

But Andrew Opie, the British Retail Consortium's food director, said: "The GSCOP, which has been in existence for more than a year, has not had a single dispute between stores and suppliers go to independent arbitration that we're aware of. A fair system for suppliers already exists. This begs the question: what will a grocery code adjudicator do all day?

"Retailers' focus is on consumers and our major concern is that an adjudicator will add to upward pressure on prices. Any system of regulation and monitoring comes with costs and the current climate makes it more important than ever that these are avoided."

The major supermarkets, which will each pay about £120,000 a year to fund the GCA, also argue that the market is fiercely competitive and huge multinational suppliers do not need more protection at a time when about 40 per cent of products are sold on price promotions, suggesting manufacturers have raised costs too far.