The Government has given the new Groceries Code Adjudicator the power to fine supermarkets if they abuse their suppliers.
Under new laws introduced today, the independent regulator will be able to penalise supermarkets if they force down wholesale prices to below cost levels.
Retailers will also be named and shamed under the new legislation.
The level of fines will be determined by business secretary Vince Cable in the coming weeks.
Liberal Democrat business minister Jo Swinson said: “Where supermarkets are breaking the rules with suppliers and treating them unfairly, the Adjudicator will make sure that they are held to account. We have heard the views of the stakeholders who were keen to give the Adjudicator a power to fine, and recognise that this change would give the Adjudicator more teeth to enforce the Groceries Code.”
She added: “We expect fines to be used as a last resort, but the fact that the Adjudicator has the power to impose them will send a strong message to retailers that compliance with the Code is not optional. I am confident that these changes will mean that the Adjudicator is able to ensure fair play in the food supply chain and keep the industry growing.”
The fines will only apply to the biggest supermarket chains with turnovers of more than £1 billion annually.
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