Written by MBM for International Supermarket News
In the UK a Law Regulates How Supermarkets Can Deal with Their Suppliers
The major Supermarkets in the UK must adhere to a Code of how they can manage their Suppliers. This Code is known as the ‘Groceries Supply Code of Practice’, or ‘GSCOP’ for short. The Code was introduced in 2010 and made law. The road to the Code being born has been a long one. In 2001 the Competition Commission investigated the Groceries Market and made several recommendations. Roll forward 14 years through a myriad of improvements, refinements and ‘beefing-up’ of the Code until today when we have a Code and a Government office with the power to fine Supermarkets up to 1% of their annual turnover.
Over the last 14 years the major supermarkets in the UK have paid lip service to Government recommendations & invites to produce and follow a set of guidelines that aim to provide the consumer with better value and the supplier with more security. Christine Tacon is the first Groceries Code Adjudicator and was appointed to enforce the Code and to enable Supermarkets and their Suppliers to work together in a more transparent, collaborative and fairer manner. This has proven not easy because the 2015 Annual update by Christine Tacon showed that the Supermarket Buyers comply with the Code ‘consistently well’ only 25% of the time and on 15% rarely comply with the Code at all. The UK still has some way to go to achieve the aims of the Code, but progress is being made. The key test of how much progress can be made will be how secure the Suppliers feel in sharing their concerns with the GCA, without fear of retribution.
The UK has not been the only country to face the challenge of dominant and too powerful Supermarkets. This is an issue for most countries and at different levels of progress more and more seem to be finding ways to tackle the challenge;
The Act on significant market power in the sale of agricultural and food products and the abuse thereof (The Market Power Act) has been in force in the Czech Republic since 2010. A Buyer is deemed to have significant market power if its turnover exceeds CZK 5 billion (£132m). The Competition Office has the power to fine, similarly to the UK.
In France, there are two methods to deal with unfair practices. The first is by the Minister of Economy who can raise a claim before a court. The second is through the competition law. Two years ago the Minister fined a retail chain €2 million and also ordered the chain to reimburse Suppliers a further €70 million.
There are no laws regulating business-to-business relationships in the food sector. That said, the German Competition Authority employs competition law to protect suppliers from anti-competitive measures by retailers and vice versa. The Act Against Restraints on Competition (ARC) specifically prohibits a party from using their market position directly, or indirectly, to unfairly hinder smaller competitors.
Each country is getting to grips with how they manage business to business competition to walk the tight rope of ensuring that the consumer gets value for money whilst giving business room to do business. The UK is currently walking that tight rope. GSCOP was introduced to protect Suppliers, yet 76% do not understand it. This means that whilst Buyers have to be trained, by law, Suppliers would not know if the Buyers were breaching the regulations anyway. To understand GSCOP completely buy the book, ‘A Complete Understanding of the Groceries Supply Code of Practice (GSCOP)’.
Darren A. Smith, Founder of MBM, wrote this article for International Supermarket News. He spent 12 years as a Category Manager/Trading Manager for one of the big four UK supermarkets. MBM enable suppliers to the big four supermarkets to secure more profitable wins. They are from your industry delivering People Development. Using their unique ‘’Sticky Learning’ ®’ you too can have the best people for the long term. Checkout their Category Management Training.