Britain's competition watchdog urged the government today to establish an ombudsman to rule on disputes between grocery retailers and suppliers after a majority of retailers failed to agree a voluntary arrangement.
Britain's Competition Commission (CC) also published a new and strengthened code of practice for grocers and gave them six months to comply.
After a two-year investigation of the grocery sector, the CC said in April 2008 an ombudsman and beefed-up code of practice were needed following complaints from suppliers of bullying.
In the consultation period that followed, Marks & Spencer, Waitrose and Aldi backed the creation of an ombudsman while most other grocers opposed it, saying it would create an unnecessary and costly layer of bureaucracy.
The CC said the ombudsman would cost about £5 million a year, including set-up costs, and described this was a "very modest" sum in the context of annual turnover of over £70 billion pounds in grocery supplies to retailers.
"We made every effort to persuade retailers of our case as it would be the quickest way to establish the ombudsman," CC Chairman Peter Freeman said in a statement.
"We are now left with no alternative but to set out the new Code of Practice and recommend that BIS (Department for Business, Innovation and Skills) set up the Ombudsman to oversee its operation."
The new code of practice will apply to all retailers with groceries turnover in excess of £1 billion pounds a year and will be included in all contracts with their suppliers.
It will prohibit retailers from making retrospective changes to terms and conditions of supply and require them to enter into binding arbitration to resolve any dispute with a supplier.
Last month, the CC also set out its proposals for a new test aimed at promoting competition among grocery retailers.
The test, which would apply to new and extended stores of over 1,000 square metres, is opposed by Britain's biggest retailer, Tesco.
Reuters