Business Law & Compliance

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Supermarkets could soon be fined 1% of their annual turnover for supply chain bullying

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There have been numerous concerns that the price wars waged between Britain’s largest supermarkets has created a somewhat strained relationship between retailer and supplier. And, after much pressuring, the government has been forced to respond.

On Tuesday David Cameron said: “It is time to make sure the [Groceries Code Adjudicator] has the power if necessary to levy fines so it can get its will obeyed”.

Christine Tacon, the Groceries Code Adjudicator (GCA), a title created in 2013 to enforce the Groceries Supply Code of Practice, will be granted the power to fine UK supermarkets that have mistreated their suppliers. This is something she applied for in December 2013.

According to her, the fine needs to be a big enough sum to “act as a deterrent.”

“It has got to hurt when I use it,” she said.

Read more about the latest named supply chain bullies:

Tacon will be able to impose penalties of up to one per cent of their annual UK turnover, dependant on the seriousness of the breach.

“This important final step will give the Groceries Code Adjudicator the power it needs to address the most serious disputes between the large supermarkets and their direct suppliers,” said business secretary Vince Cable.

“I created the Groceries Code Adjudicator to ensure a fair deal for those who supply goods to supermarkets such as farmers and small businesses. I am pleased today to be giving the Adjudicator the final element in a set of powers that will give this new body all the tools it needs to succeed in this challenging and important role.”

But it seems that David Cameron has caved in to the Treasury by proposing a reduction of the fine to 0.75 per cent.

Although Downing Street has suggested that there was “no delay or watering down” of the proposals, Cable seemingly wrote to the prime minister that he was “concerned that continuing pressure to reduce the maximum fine” will “not only risk failing to meet your commitment, but also carries significant legal and political risks.

“Given the strength of feeling on this issue, to depart from the recommendation at this late stage would at best be seen as a watering down of sensible proposals and at worst pose a strong risk of Judicial Review.”

Tacon’s request is sure to meet strong opposition from UK retailers. The British Retail Consortium has already stated that the introduction of a fine is “unnecessary” and “heavy handed”.

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