Grocery ombudsman plan criticised

Tesco warned it could increase red tape and prevent retailers working flexibly with their suppliers. But farmers who describe a "culture of fear" in the food supply chain welcomed the Competition Commission's recommendation.

The Commission's package of proposals includes the creation of a new competition test in planning decisions involving new grocery stores. It would apply to planning applications for new stores bigger than 1,000 square metres. Local planning officials would carry out competition assessment tests for such applications with the Office of Fair Trading's guidance.

The Commission also wants a new Groceries Supply Code of Practice to replace the existing supermarket code. The new code would be extended to apply to all UK grocery retailers with a turnover of more than £1 billion.

A new ombudsman would be set up to investigate suspected breaches of the new code - and arbitrate on disputes between supermarkets and their suppliers, the Commission said. He or she would have powers to proactively investigate retailers' records to find out whether breaches had taken place.

The Commission also wants to stop the practice of supermarkets using banks of land to prevent rival chains opening up new stores nearby. To achieve this it wants a ban on restrictive covenants, which can prevent land being built on by a competitor after being sold. Restrictive covenants already in place on retailers' land in high-density areas should be lifted, the Commission said.

But its recommendations fall short of forcing supermarkets to sell off any of their land or stores. The Commission had earlier indicated that planning rules were preventing new stores being built on the edge of town centres. But it has now dropped the idea of trying to change planning rules to promote edge of town developments.

NFU president Peter Kendall said a new, strengthened supermarket code would "...help to dispel the culture of fear in the supermarket food supply chain and lead to more transparency and trust." He also welcomed the proposed ombudsman, saying this would ensure informed decision-making processes.

But commenting on the new code and creation of an ombudsman the British Retail Consortium's director general Stephen Robertson said: "It's not clear what need there is for another bureaucratic layer." He added: "Creating new channels for complaint would do nothing but pile on extra costs which have to be met from somewhere."

That view was echoed by Tesco's executive director for corporate and legal affairs, Lucy Neville-Rolfe, who said: "Tesco considers that introducing a new ombudsman could be bureaucratic and an unnecessary cog in a supply chain which has worked well for consumers. More red tape is likely to stifle innovation and investment and reduce the ability of retailers and suppliers to work together flexibly to deliver the best deals for customers."