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The Competition Commission (CC) yesterday published the finalised Groceries (Supply Chain Practices) Market Investigation Order 2009, which sets out the newly strengthened Groceries Supply Code of Practice (GSCOP). The CC has also formally asked the Department for Business, Innovation and Skills (BIS) to establish an Ombudsman scheme to enforce the GSCOP. The announcements have generated widespread comment on both retailer and supplier sides.

The strengthened GSCOP aims to address some of the problems it found in the CC's report of April 2008 on the groceries market, notably issues resulting from strong buyers transferring excessive risks and unexpected costs to suppliers. The Order containing the GSCOP can be found here. The CC's explanatory note on the Order can be found here. The obligations set out in the Order will come into force on 4 February 2010. That is therefore the target date for compliance by designated grocery retailers.

The CC has also recommended to BIS that an Ombudsman scheme be set up in order to ensure effective enforcement of the GSCOP. The CC's attempts to obtain agreement from grocery retailers to sign up to such a scheme voluntarily have failed. The Ombudsman's functions would be to arbitrate on disputes between grocery retailers and suppliers, and actively investigate complaints under the new GSCOP. This is perceived by the CC as being key to the GSCOP's success, particularly because suppliers may be reluctant to bring complaints.

The CC's formal letter of recommendation to BIS is here. BIS will now need to consider the recommendation, and if it agrees BIS must then take the required legislative steps to establish the Ombudsman. From the CC's point of view, the benefit of this approach is that primary legislation could provide for greater powers than voluntary undertakings might have done, and therefore make the GSCOP more effective (e.g. by providing for fines on retailers for non-compliance with the GSCOP).

The CC urges that legislative steps to establish and Ombudsman are taken as soon as possible. Government's agreement with the CC's recommendation may not, however, be automatic. BIS has indicated that it may have to consider the ramifications of such an Ombudsman scheme. If BIS does agree the need, time will have to be found in the legislative timetable.

Please see our previous Law-Nows on these issues below:

CC groceries investigation: ombudsman and land order consultations

Strengthening the Groceries Supply Code of Practice – public consultation

Competition Commission's final report in groceries market investigation

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The original publication date for this article was 05/08/2009.