Asda and Tesco have strongly attacked Competition Commission’s crackdown plans on supermarket’s relationships with vendors, saying it will escalate prices as grocers will be experiencing further deluge of red tape.
The Commission announced its proposal for Groceries Supply Code of Practice which prohibits retrospective adjustments to contracts. It also makes it difficult for grocers to delist vendors and prevents them from holding vendors responsible for damaged products.
According to Asda’s director, Paul Kelly, cost of administration of code and its adverse impact on ‘competitive tension’ between grocer and vendor will escalate prices for consumers. He remarked that it is perverse to introduce regulations, which by Commission’s own admission will shoot prices up.
Inquiry’s participants have been given one month’s time to respond to commission’s guidance, after that GSCOP will be brought in before end of 2009.
Lucy Neville-Rolfe believes that proposal would add to industry’s costs substantially in the current economic climate. He argues that Commission is claiming it wants to remove undue burden on business, but it did no cost benefit analysis, which is supposed to be carried out as per Government guidelines.
Kelly alleged that new code will protect under-performing suppliers, whereas good manufacturers would lose because they will not be able to replace poor performers.
Tesco is expecting verdict on its appeal of the Competition Test from Competition Appeals Tribunal in coming weeks.