Essay on Voluntary Code of Practice

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Suppliers have always been in a difficult position when It came to dealing with the ‘big four’ supermarkets. (Tesco, Sainsbury’s, Morrison’s and Asda) this was due to large buying power of each supermarket. However in 2002 a voluntary code of practice was brought into force to readdress the balance of power between large supermarkets and there suppliers, after the competition commission had conducted an inquiry into complaints that supermarkets were abusing their market position in their dealings with suppliers. This year long investigation was concluded with the findings that supermarkets were acting against the public interest and that a Supermarket Code of Practice should be introduced. This essay will look at the regulations that were…show more content…
(Dobson et al, 1998). A good example of this kind of behavior was in 1999 when a supermarket ran an in store promotion but asked the supplier to pay the costs involved. This meant the supermarket asked the suppliers involved to pay a £20,000 donation which would “guarantee” the availability of the supplier’s product. (NFU, 1999) although the supermarket claimed this was only a donation and voluntary, the suppliers were left with the thought of not having their product available in store unless they opted to pay the fees. This meant the smaller suppliers were pressurised to pay for the scheme due to the fear of their product not being stocked if they refused. This kind of action was just one of many the competition commission were alerted to when they were undertaking their independent review of the relationships between the two parties. The commission concluded that practices like they one above, adversely affected the competitive nature of suppliers and ultimately had an affect on the levels of competition in the supplier market, as the suppliers would have less funds available to develop products or innovate with new supply or development practices. Therefore the consumers would be
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