The EU’s long-awaited report on the food chain was published at the end of October. Unfortunately, it didn’t mention anything about the major challenges being faced by farmers, foremost of which is the unfair bargaining power of processors.
Published in John O'Groat Journal 12 December 2014
This came hot on the heels of the formal investigation against Tesco launched by the Serious Fraud Office in the wake of allegations that the supermarket's buyers had been involved in some bonus-inflating chicanery to overstate the profits, such as inflating their supplier contributions.
Too many farmers are struggling – some have experienced a 37% increase in energy prices since 2007 – and the unfair power dynamic between suppliers and retailers is weighted heavily in favour of the latter. Supplier contributions, for example, are paid by farmers to fund supermarket promotions of their product and are absolutely saturated in a retail bonus culture.
Duncan Swift, leader of the Food Advisory Board at Moore Stephens, even compared the bonus culture to the toxic bank bonus culture. After all, “supermarket buyers [operate] in trading rooms similar to those operated by the banks and investment companies.”
Supermarkets can tell a farmer they'll buy cheese at £10 per kilo and then, once the cheese has been delivered, boot it down to £5 per kilo. Sure, the farmer can complain but who's going to buy his cheese next time?
I'm all for supermarkets cutting prices. But our suppliers shouldn't be the ones who take the hit. Retrospective deductions, the threat of de-listing, demanding standards' compliance but at the suppliers' expense – these are all ways that Unfair Trading Practices are strangling farmers.
“But wait!” I hear you cry. “Alyn, you haven't mentioned the European Commission's report on Tackling unfair trading practices in the business-to-business food supply chain!”
Well, I hadn't bothered to mention it because this report is a completely toothless tiger. It calls for voluntary measures even while it acknowledges that Unfair Trading Practices (UTPs) may not be denounced because of the fear factor surrounding the relationship between the supermarket juggernaut and the farmer who's scratching a living on the narrowest of margins. Not only that, but the report even says there are limits to how far a self-regulatory initiative can go in providing for a dispute resolution mechanism.
The UK Grocery Code Adjudicator doesn't have the power to apply truly dissuasive financial sanctions and we need a strong external ombudsman to oversee the supply chain, one with a confidential whistleblowing service and the power to enforce the concept of fair practice against supermarkets.
The updated Milk Package authorises producer organisations to negotiate collectively with large buyers, which is great, but we have to accept that the EU considers each segment of the supply chain in isolation. Competition policy protects the individual consumer against the threat of being rooked but it's not designed for this particular problem.
That's why I've wrangled a promise from Phil Hogan, the new Commissioner for Agriculture, that he'll look at reviewing competition law. I'm currently serving as Shadow Rapporteur in my group's file on unfair practices in the food supply chain, so you'll be hearing lots more from me on this.