Supermarket Ombudsman

For the last couple of years there has been a debate about if a regulator was needed to oversee the way that the supermarkets work. Then in January the government announced that they would create an ombudsman to be an independent arbiter of the relationship between the farmers and growers and these multi billion pound retailers.

For many years now there have been stories seeping out that the supermarkets were manipulating the market in such a way that it was damaging British Agriculture. In its simplistic form the farmer would sell to who ever would offer the highest price, while the retailer would want to pay the least it could. That system worked well when every high street had many retailers selling that food to the consumer. But with food retailing now in the hands of just four major retailers, that system has not been working. Now the retailers dictate what price they will pay.

While this has helped keep food cheap for the consumer, it has also placed massive power over food in the hands of a few people. Via this power and this downward pressure upon price, farmers are forced to compromise on the welfare of the animals that we derive our food from. As the taxpayer, through the Department of the Environment, Food and Rural Affairs DEFRA, often have to bare the cost disease outbreaks, and as intensive production combined with the downward cost pressure on welfare standards, and the consumer pays for these costs via taxes while allowing the supermarkets to make greater and greater profits.

However, it is the way that the supermarkets are currently implementing the contracts with farmers that is really damaging British agriculture. All the major players in retail will make the farmers who supply them invest in packaging to suit their needs. Further to guarantee supply to meet the supermarkets needs, the farmers and growers have to grow more than is required to meet that contract. As plants or animals never grow exactly to a timetable, to ensure that enough are ready on time, more is produced than is needed. As these contracts as standard forbid the farmer selling this surpluses, the system generates wasted food. This adds costs to the farmer but not to the supermarkets. Then the most pernicious part is if the supermarkets decide to have a special offer be that an extra fifty percent in the pack for the same price or a two for the price of one, it is the farmer or producer that pays these costs not the supermarket. It is like the supermarket deciding to cut the price they are paying to the farmer and making the farmer pay for the cost of doing this.

Therefore it is not surprising that the supermarkets have resisted the appointment of an ombudsman. They, the major retailers, argue that if the system is so bad why are the farmers willing to supply them? While that would have been a legitimate question perhaps thirty years ago when there were still independent retailers about, but now there are no real alternatives to whom the farmers can sell.

Effectively the major retailers force farmers to supply them, on their terms, knowing that the farmers have nowhere else to sell their produce. Further if the farmers protest or go to the media with their complaints, they get de-listed. The supermarkets stop buying from these farmers, often killing the farmers business.

This also explains why it can be really difficult to find British produce in the shops. The major retailers in tying down the farmers to produce on the supermarkets terms stops the farmers from selling via other markets. While also buying from overseas farmers and growers at the lowest price, often to keep the farmers in their place.

By stopping at least the worse aspects of the major retailers practices, the ombudsman will benefit everyone in the food supply chain. However, the supermarkets are trying to tie up contracts ahead of the service starting. Thus making it look as though the ombudsman was never needed as the ombudsman will only be able to look at new contracts not historic or current ones.

While there are many benefits that the major retailers have brought to food, but equally there have been many seriously adverse aspects to food retailing being controlled by just four chains. While having an ombudsman will not change where people shop nor will it increase the prices consumers pay, it will ensure that the farmers and growers get a fair deal from trading with these giants.