The Grocery Supplier Code of Practice (GSCOP) has been developed by the Office of Fair Trading (OFT) and is designed to protect suppliers from being bullied by the larger supermarket chains.
The code, which applies to 10 UK supermarkets with annual sales of more than £1bn, will also see the introduction of an independent retail ombudsman to "encourage free and fair competition".
Iceland chief executive Malcolm Walker has criticised the move as "madness". Speaking to The Daily Telegraph, he said: "We are going to do the bare minimum [to comply]. It's a complete waste of time. Nothing is going to change. Big suppliers bully small retailers and big retailers bully small suppliers. It is a fact of life."
The Forum of Private Business (FPB) dismissed Walker's comments as "extremely disappointing" and claim they reflect the "common attitude supermarkets have towards their suppliers.
FPB’s chief executive Phil Orford added: This bullying behaviour is simply bad practice and an abuse of their dominant market position. To attempt to normalise it is unacceptable."
The British Retail Consortium (BRC) called the new code "tough" on retailers, and said the introduction of an ombudsman is "unnecessary".
However, the Institute of Practioners in Advertising has come out in support of the new code of practice, claiming that supermarket price promotions are destroying brand strength and loyalty.
"While retailers are winning valuable market share in their war against each other, manufacturers are suffering widespread collateral damage to their brand loyalty and an erosion of brand equity," said IPA director-general Hamish Pringle.
Experts say the ombudsman will give smaller brands the muscle required to get a good deal from supermarkets.
The Competition Commission, which recommended the creation of the ombudsman, said it would benefit businesses by allowing them to "gain greater certainty about their contractual payments, which will lead to increased survival and greater investment".
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