Call to prevent retailers using Republic as secret ‘honey pot’

Major retailers will be prevented from using the Republic as a secret "honey pot" and forced to reveal how much money they make in the Republic, if recommendations made by an Oireachtas committee this morning are adopted.

The Joint Committee on Agriculture, Food and the Marine is also proposing a ban on below cost selling of staples such as bread and milk and said that supermarket chains that "bully" suppliers should face heavy penalties.

The suggestions stem from fears that major retailers are driving primary producers out of business and the committee is also calling for the establishment of a statutory code of conduct for the grocery sector as well as an independent ombudsman to represent consumers and producers.

The committee accused large multiples and wholesalers of “exerting undue pressure on pricing” on producers and said that some were being coerced and bullied into funding promotions and discounts but were afraid to reveal how they were being “squeezed out of the market” by big retail chains out of concern that their products would be delisted.

“There are serious concerns that the current imbalance of power between suppliers and retailers is unsustainable in the long term and that the family farm structure and primary producers are being squeezed out of the market,” the reports says.

The committee expressed “serious concern” over “hidden costs arising from additional fees and market support initiatives” and said such practices should “not be tolerated” and called for heavy penalties to be introduced on a statutory basis for retailers “found to be engaging in illegal practices”.

The report also expressed “serious concerns” about the growth of the own-brand sector in recent years.

While the committee accepted it could help drive the price of groceries down, it claimed there was “a dark side to the sector”.

The committee said own brand products “give too much power to the retailer and make it too easy for them to substitute” one supplier for another.

It said the prominence of own-brand stock was “allowing retailers to bully suppliers” by threatening to switch and that the threats put serious pressure on supplies and drive downwards the supply price leading to a larger profit margin for the retailer”.

Committee chairman Andrew Doyle denied that any costs associated with the establishment of an office for a grocery ombudsman or moves to ban below cost or the selling would lead to higher prices for consumers.

He also defended the criticism of own-brand product lines and said that while they could be of benefit to shoppers, they gave too much power to too few retail chains.

“It would be a lot easier to establish who will bear the costs associated with the statutory code if we knew about the big retailer profit margins and the ombudsman’s office does not have to cost a fortune,” Mr Doyle said.

He declined to express an opinion as to why all the big supermarkets in the Republic keep their profit margins a closely guarded secret. "There was that leaked document which said Ireland was the honey pot for one of the major retailers so maybe that is behind it," he suggested.

Committee member Eamon O’Cuiv said while he would not jump to conclusions about the reasons for retailer secrecy, people would be right to be “very curious” about just how much money was being made here.

“If they have nothing to hide then they should have no problem letting us know their profit margins,” the Fianna Fail TD said.

IFA president John Bryan welcomed the report and called on the Government to act immediately on its recommendations and "restore equity to the food supply chain and curb the dominance of the retail multiples."

Key recommendations

A statutory code of conduct for the groceries sector to be implemented without delay.

An independent supermarket ombudsman.

All multiple suppliers or retailers in the State to outline in writing their buying and supplying terms and conditions.

Legislation introduced to force the publication of profits and turnovers of the large multiples and large processors.

All-Ireland market for contracted milk to ensure supply of fresh milk throughout the winter.

Tighter rules for labelling to be put in place detailing processor code and country of origin.

Using staple goods such as milk as loss leader to be outlawed.