The Competition Commission (CC) has asked for comments on its strengthened version of the Groceries Supply Code of Practice (GSCOP) by 30 March 2009. This is relevant to large supermarkets and their suppliers and stems from the CC's market investigation into the grocery sector.

The GSCOP applies to Asda, Co-op, Marks & Spencer, Morrisons, Sainsbury's, Somerfield, Tesco, Waitrose, Iceland, Lidl, [Aldi1]and any retailer of groceries designated by the Office of Fair Trading (OFT). The OFT can only designate a retailer where it has turnover exceeding £1 billion attributable to retail supply of groceries in the UK.

The main features of the GSCOP are that it will:

  • be included in all retailers' contracts with their suppliers;
  • include an overarching fair dealing provision;
  • prohibit retrospective changes to terms and conditions;
  • prohibit retailers from entering into arrangements with suppliers that result in suppliers being held liable for losses due to shrinkage;
  • limit the extent to which suppliers are required to pay for listings, promotions, inaccurate forecasts or customer complaints;
  • set out a clear procedure for resolving disputes;
  • require retailers to provide reasonable notice and commercial justification before a supplier is de-listed;
  • require retailers to enter into binding arbitration to resolve any dispute with a supplier, with costs generally payable by the retailer;
  • require retailers to keep written records of all agreements with suppliers on terms and conditions of supply.

Retailers will also have to provide annual training to staff on the GSCOP, plus establish a GSCOP compliance officer who will act as a point of contact for suppliers for issues arising under the GSCOP.

Groceries are defined as:

  • food (other than that sold for consumption in the store);
  • drinks (alcoholic and non-alcoholic, other than that sold for consumption in the store)
  • cleaning products;
  • toiletries and household goods.

Groceries do NOT include:

  • petrol;
  • clothing
  • DIY products;
  • financial services;
  • pharmaceuticals;
  • newspapers;
  • magazines;
  • greetings cards;
  • CDs/DVDs;
  • video/audio tapes;
  • toys;
  • plants/flowers;
  • perfumes;
  • cosmetics;
  • electrical appliances;
  • kitchen hardware;
  • gardening equipment;
  • books;
  • tobacco/tobacco products.

The CC also announced that it will shortly publish a draft Order outlining measures to prevent exclusivity arrangements and restrictive covenants being used by grocery retailers to restrict market entry and also will consult on undertakings to establish a supermarkets Ombudsman to oversee and resolve disputes under the GSCOP.

Industry reaction is that the GSCOP is tougher than its predecessor, but much will depend on the enforcement of the GSCOP, which is where the Ombudsman becomes important.

Please click here for the draft of the GSCOP and explanatory notes.

Footnote

1.It is not clear at present whether Aldi will be subject to the GSCOP

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 09/03/2009.