Supermarkets are probably the most competitive business in the UK. Why then are they being lumbered with an ombudsman, a new supplier code and all the compliance bureaucracy that goes with them?

Four big retailers dominate grocery supplies in Britain, but rather than act as even an unofficial cartel, they are fiercely competitive. They have done more to keep inflation low than the Bank of England. The public has a choice and uses it, forcing stores to undercut each other.

Compare that to other industries dominated by a small handful of suppliers – banking or oil, for instance – where there is no discernable difference between the companies and no sign of trying to gain market share from each other.

Yet the supermarkets now face a toughened up Supplier Code of Practice that has to be incorporated into all contracts. They must employ compliance officers to report to the Office of Fair Trading and to report to audit committees while the annual report must include a compliance statement. There has to be a binding arbitration process, records of all dealings with suppliers, and there will be a new ombudsman.

And while the old code of practice applied only to the Big Four supermarkets, this new regime will incorporate the 10 largest groups, the turnover threshold being just £1bn a year.

The OFT and the Competition Commission have waged a war against the supermarkets over the past decade even though the sector is marked by cut-throat competition. And – unlike banks – customers like their suppliers even if they are only as loyal as the latest price offer. That is why the big retailers have been able to use their strength of their brands to diversify beyond groceries into electricals, entertainment clothing – and even banking.

The cost of this bureaucracy will not be cripplingly high for a company the size of Tesco or Asda, but it is unnecessary and suggests government is more interested in regulation than competition. When there are better targets, why keep picking on the supermarkets?

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