David and Goliath battle still needs an independent referee

LAST Thursday, James Withers's blog was particularly upbeat, urging his readers to take inspiration from the story of David and Goliath.

The chief executive of NFU Scotland was commenting on the publication of a new code of practice aimed at giving suppliers fairer treatment in the grocery chain.

Withers sees the code as a major step forward and the culmination of a six-year campaign by the union to bring in tougher measures to protect farmers. He also sees it as an unqualified vindication of the union's decision to take on the powerful supermarkets and beat them.

When the union launched its campaign in 2004, there was a well-aired view that this was a crazy course of action that would end in tears.

But for many farmers, "David and Goliath" struck a chord and the analogy was spot on.

The Groceries Supply Code of Practice, which applies to all supermarkets with a turnover of 1 billion or more, is to be stitched into agreements between retailers and suppliers, end retrospective adjustments to terms and conditions of supply, and insist on good commercial reasons before suppliers are de-listed.

But there is a part missing. The union call for the appointment of an independent ombudsman, financed by the retailers, has been parked. Confronted with the demand, the retailers – who insist they give farmers a fair deal – have baulked at paying for an ombudsman and have thrown the suggestion back at the UK government.

And as such a move would require primary legislation, there is little likelihood that it will be forthcoming before the general election later this year.

The need for a fully-armed ombudsman to police compliance remains a key element of the code for the union, which is determined that the momentum is maintained and a formal policing mechanism should be an "absolute priority" for an incoming government.

Without an ombudsman there are concerns that even the beefed-up code will be weakened. Withers believes the office is vital to the implementation and effectiveness of the new regime.

NFU Scotland has received backing from the cabinet secretary for rural affairs, Richard Lochhead, who has publicly called on the UK government to bring in an ombudsman – which was also a specific recommendation of the Competition Commission.

A Commission spokesman has linked the role to help "tackle the climate of fear" among suppliers, a concern expressed graphically by the president of the English NFU, Peter Kendall.

Anecdotal stories about what Kendall labelled the bully boy tactics abound, but getting firm evidence has proved difficult. Under the previous Supermarket Code of Practice introduced in 2000, only 17 complaints were made.

The new code is seen as a step in the right direction and a much-needed replacement for a discredited and ineffective mechanism.

The Competition Commission has already outlined the functions of an ombudsman, including the ability to enforce binding arbitration of disputes; receive confidential complaints and publish guidance on specific provisions.

In short, the role of the ombudsman would be proactive, and the office would be armed with teeth and clout.

There is much at stake – the major supermarkets are Scottish farmers' biggest customers and take 80 per cent of the food and drink from farms. They are essential players in the modern grocery supply chain. They need farmers and farmers need them. A robust system is needed to ensure that the chain operates fairly and represents the consumer as well as the producer interest.

However, the idea of a grocery sector ombudsman is not shared universally within farming circles, with some major suppliers pointing out that their relationships with retailers are governed by a dedicated supply chain and also influenced by global, not national demands.

But there is little evidence of a balanced relationship between producers and retailers currently, an issue highlighted in the milk sector where greater consumer confidence for the longer term is needed, as is better communication within the supply chain and more effective contracts between producers and buyers.

Across the grocery chain there is a need for some form of action to restore the producer's place as an equal partner, and redress what is commonly seen as a weak – and weakening – position in the basic process of food production.

Withers argues that as the European Commission is looking at mechanisms to ensure fairer relationships within the food supply, the early creation of a UK ombudsman could offer a model for other countries to follow.