New calls for a supply chain watchdog in UK

By Chris Mercer

- Last updated on GMT

Related tags: Milk prices, Supermarket, Milk

An independent watchdog is needed to ensure fair dealings between
supermarkets and food suppliers, says a UK economics group, echoing
similar calls from parts of the dairy industry.

Competition authorities should set up a "retail monitor" following their renewed investigation of the UK's grocery supply chain, said the New Economics Foundation (NEF), an influential think tank. Some dairy farmers recently called for a similar watchdog to regulate farmgate milk prices, amid concerns that supermarkets have treated producers and processors unfairly. NEF said: "It is clear from the new round of evidence, incomplete and inadequate though it is, that abuses continue. The [Competition] Commission must therefore set out some more effective mechanism to address them." ​ It claimed a new watchdog could make regulation more efficient by working continuously on a case-by-case basis, removing the need for lengthy investigations. The NEF also poured more scrutiny on the Competition Commission's grocery chain probe. It accused the Commission of failing in its duty by law to defend the interests of consumers, claiming the current market situation hampered innovation in the food chain and damaged consumer choice allowing local shops to disappear. Public pressure has grown on supermarkets since the Commission published its 'emerging thinking' on the grocery chain earlier this year. Retailers have always denied abusing their market position when dealing with suppliers. And the Commission said it had not received evidence to back up allegations in many cases. But a group of 100 MPs, and members of the All Party Parliamentary Group on Dairy Farming, said the closure of around 500 dairy farms since last July was because supermarkets and others had purposefully held milk prices​ below the cost of production. Milk prices have played a large part in the grocery probe. Average farmgate prices were around 18 pence per litre for much of 2006, below the cost of production for some. Despite this, most dairy industry leaders, including the dairy wing of the National Farmers' Union (NFU), have rejected calls for a milk price regulator, preferring to find a solution on the open market and via negotiations with retailers. Early signs this year have given them reason to be positive. Tesco, the UK's largest supermarket, last week said it would launch direct contracts with around 850 of its supplier farmers and pay them 22 pence per litre for their milk. The move is the latest in what some see as a PR bombardment from retailers, in answer to the Competition Commission probe. But the NFU said it was "the most significant and encouraging development in the dairy industry for a very long time".

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