Tesco chief slams ombudsman plans

(Reuters) – Government plans to introduce a watchdog to settle disputes between supermarkets and suppliers could hurt consumers, the chief executive of Britain’s biggest grocer, Tesco (TSCO.L), told the Financial Times in an interview.

The competition watchdog asked the government last year to establish an ombudsman after a majority of retailers failed to agree on a voluntary arrangement.

But the Financial Times reported that Tesco’s head, Terry Leahy, attacked the proposals, saying the consumer benefited from the positive level of competition between retailers.

“Everyone knows supermarkets are one of the most competitive industries around. That competition puts power in the hands of the consumer,” Leahy said in the paper’s Friday edition.

“An ombudsman would be there to protect suppliers but should be there to protect consumers,” Leahy said.

The competition commission conducted an investigation between 2006 and 2008 and found that the strength of Britain’s top four grocers — Tesco (TSCO.L), Asda (WMT.N), J Sainsbury (SBRY.L) and Morrison (MRW.L) — has helped to keep food prices down for shoppers.

But there are concerns the consumer could suffer if retailers squeeze suppliers to the extent that they can’t afford to invest in products or to innovate.

Leahy told the paper Tesco had a good relationship with its suppliers.

“We rely…on our suppliers to provide safe food,” he said. Britain’s opposition Conservative party has backed calls for an ombudsman and the ruling Labour party is expected to announce a decision soon.

(Reporting by Caroline Copley; Editing by David Gregorio)