Tesco throws its weight behind supermarket tsar

Tesco, the country's biggest supermarket, will back calls for legislation to create a supermarkets tsar, should the big 10 grocers fail to accept such authority voluntarily.

Sir Terry Leahy, Tesco's chief executive, and his counterparts at Asda, J Sainsbury and Iceland will be faced with an updated code of conduct and an ombudsman to monitor their treatment of suppliers following a Competition Commission report in April.

However, there are fears that the introduction of an ombudsman could be delayed as the stores are unlikely to agree on how much power the postholder should wield. A spokesman for Sainsbury's indicated that the chain could fight the move as "an unnecessary measure".

Last Tuesday, the Cross Cutting Remedies Group, chaired by the Liberal Democrat MP Andrew George, met at the House of Commons with other industry ombudsmen, government officials and lobbyists to discuss the problems. The group is a coalition of MPs and pressure groups such as ActionAid and Friends of the Earth.

The group wants the Department for Business, Enterprise and Regulatory Reform to threaten legislation if the supermarkets do not sign up to the ombudsman scheme.

A Tesco spokesman said: "Unless everyone in the industry can agree to sign up to the proposal, we believe that it would require legislation. We work hard to ensure that we have good relations with our suppliers, and more than 1,500 of our suppliers have been with us for five years or more."

Mr George said he wanted the department to threaten to introduce legislation when it makes its formal response to the commission's report. This is due by the end of July, but is expected this week, before the Commons breaks for summer recess.

"If supermarkets want to be obstructive, then we would require primary legislation," said Mr George.

A senior department official attended Tuesday's meeting, where Walter Merricks, the financial ombudsman, briefed those present on how his role worked in practice.

The coalition would like the supermarkets tsar to be "proactive", said a source, so that he or she could investigate suspected poor practice rather than simply responding to official complaints. The source added that suppliers lived in a "culture of fear" that prevented them airing their grievances in case they lost big contracts with the supermarkets.

In a statement, Sainsbury's said: "We believe that the creation of an ombudsman to look into relationships between suppliers and retailers is an unnecessary measure and that issues should be addressed through the proposed changes to the existing code of practice."

An Asda spokeswoman said the chain was "agnostic" about the ombudsman but warned the intervention could drive up costs: "It would be ironic if the end result of introducing an ombudsman was to force up prices ... at a time when household budgets are being stretched and inflation is at its highest level for years."

The commission has set a deadline of next January for supermarkets to agree terms. If they fail to do so, it will recommend legislation.