European industry is reinventing the wheel

29-Sep-2013 - Last updated on 01-Oct-2013 at 08:45 GMT

Related tags Supply chain European union Uk

Clare Cheney, director general, Provision Trade Federation

Just as the UK’s new Groceries Code Adjudicator Christine Tacon begins to make her presence felt in the UK, on September 16 European food industry associations launched ‘The Supply Chain Initiative - Together for good trading practices’, to address the same unfair trading practices as the UK's Groceries Supply Code of Practice (GSCOP).

But the European initiative is really reinventing a wheel that failed in the UK in the past because the GSCOP had no teeth. The EU initiative requires firms in the food chain to register to confirm that they comply with good practice principles as set out in 2009 European Commission (EC) paper: ‘A better functioning of food supply chain in Europe’. Of the 82 firms intending to register, only four retailers that operate in the UK are included: Tesco, Aldi, Lidl and Marks & Spencer, because they operate in more than one Member State (MS).

The EC’s principles of good practice are sufficiently vague to allow each side to claim their views in an argument. For example, the responsibility for risk principle says: ‘All contracting parties in the supply chain should bear their own appropriate entrepreneurial risks.’ But the meaning of ‘appropriate’ could be disputed, as the term ‘reasonable’ was in the UK GSCOP.

Although the European initiative proposes a system for reporting disputes, it is unlikely to be widely used because, as in the UK, suppliers are reluctant to confront their powerful customers.

‘Threat of a fine’

No, if anything is going to work in cases of genuine unfairness, statutory powers such as those provided to the UK adjudicator are probably needed. After all, the threat of a fine of 1% of a firm’s turnover as proposed in the UK has to be a powerful deterrent.

However, it is unlikely that any investigations will ever get that far because of the costs of the process to be borne by the ‘defendant’, plus the damage to reputation. Ideally, any malpractices will be resolved before an investigation is launched.

Indeed, Tacon has said her ideal result would be to never need to conduct an investigation because the retailers will rectify any breach of the code to her satisfaction before any formalities begin. Moreover, because she does not have the resources to address lots of individual complaints, she proposes to identify instances of widespread abuse affecting a large part of the supply chain and take these up with the retailers.

The beauty of the UK system is that it does not involve long- winded bureaucratic processes before action is possible.

If the UK initiative is a success, other MSs should follow and tackle the situation in their own countries.