Groceries Code Adjudicator Bill [HL]

Baroness Byford Excerpts

Thursday 28th June 2012 Grand Committee

[Baroness Byford]

My Lords, I must admit that when reading through the Bill very carefully, I am somewhat sympathetic to the proposal to have some form of appeal apart from that in Clause 9(4), which the noble Lord, Lord Borrie, just mentioned, where an appeal can be made directly to the High Court. I am grateful to my noble friend for tabling this amendment. I also share the concerns of the noble Lord, Lord Borrie, that it should not affect anything other than the severest penalty of fines. Mischief could be had by way of delay. I have followed proceedings on the Bill all the way through, and when amendments arise I will try to make sure that the issues are dealt with as quickly as possible. I wonder whether it might be helpful—it probably is not—if the provision were added before or after Clause 9(4) rather than in the place suggested by my noble friend Lord Howard of Rising. That might be a better place for it, if the Minister is inclined at all to be sympathetic to the idea. It is reasonable that retailers who are taken to court or held up on grounds of not adhering to the code should be able to appeal in some way. I am no lawyer but I would support having a lesser approach. However, the other one will still be there as well. I do not know how the Minister will respond to that.

[Lord Browne of Ladyton]

My Lords, I support the amendment in part. The complexity of the legislation is such that it takes a bit of figuring out to work out exactly what effect it will have on the regime that will otherwise persist. If I understand the ambition of the noble Lord, Lord Howard, it is to introduce a right of appeal on the part of a retailer in respect of any of the enforcement consequences and that those appeals should all be to the Competition Appeal Tribunal.

In the current structure of the Bill that seems to be unnecessary because there is no enforcement mechanism in respect of recommendations. The matter of whether or not recommendations are accepted is entirely for the retailer. The recommendation is made, which the retailer either accepts or does not, and there is no enforcement mechanism. We will come to my discontent with that structure in a later amendment today, I hope. There is no necessity for an appeal against a recommendation because the retailer is effectively its own appellate body in respect of a recommendation. Retailers can ignore it, and appear to be able to do so without consequence.

On the “naming and shaming”, which is the operative phrase used for the second of the enforcement mechanisms, I agree with the noble Lord that in commercial and reputational terms that could be much more significant for the retailer than a fine. If we get to fines in this structure, I expect that they will be substantial, otherwise they would be pointless. Naming and shaming could be significantly damaging to the reputation of a business built up over decades. I know that witnesses who have given evidence to the BIS Select Committee and been party to the discussions on these matters in the consultation period which has informed our deliberations have differing views on how retailers will respond to naming and shaming and whether it matters to them. I think that an argument can be made that it is a significant penalty and that, in fairness, there ought to be an opportunity for the retailer to have that decision reviewed or appealed in some way before it is implemented.

I note with some interest that the amendment moved by the noble Lord, Lord Howard, creates a right of appeal even after the penalty has been imposed. I can see the merit in that, but it seems to me that if we accept that there ought to be an appeal then we ought to stay the execution until the appeal takes places. There is no point in pardoning an already executed prisoner. That would be a pointless exercise in many ways apart from—well, I do not want to take the analogy too far.

To that extent I support the argument of the noble Lord, Lord Howard, and his amendment—so I support it in part. That may, in my experience of this Committee today, be the kiss of death to the proposed amendment, no matter how sensible or fair it is. The noble Lord has the advantage, of course, of the partial support of the noble Lord, Lord Borrie. That might persuade the Government that there is sense in the amendment, as that seems to be the touchstone in determining whether there will be a positive response from the Treasury Benches. However, the question—and I think it does a service to our consideration—feeds into our later deliberations on the issue of fines. I would just say in passing to the noble Viscount, Lord Eccles, that I agree with much of what he said. Although I do not agree with the reasons why he is making the arguments, I will try to explain later why I agree with much of what he said and why I think that it was really important. There is a fundamental systemic misconstruction in relation to fines in the middle of the Bill which we need to address.

The Committee’s deliberations so far are getting to the heart of the issue of the workability of this regime. I suggest, with respect, that it is incumbent on the Minister to explain why there is this differentiation in approach. Why are there three methods of enforcement? One of the methods is not enforcement at all but is simply a suggestion which can be accepted by the retailer. One is a fairly draconian consequence for a substantial business which will probably operate in all of our communities, and have a replication in all of our communities, but a consequence in which there is no system of appeal at all. The third method, and I will come to it in more detail later, either should be in the Bill or it should not be in the Bill—but it should not be halfway in—and that is financial penalties.

I would say, finally, that I am grateful to the noble Lord, Lord Howard, as I am also to my noble friend Lord Borrie, for their comments on expansion of the Competition Appeal Tribunal. I will need to go away and research the issue. When I first read the Bill I thought that adding to the workload of the already overworked High Court in England, Wales and Northern Ireland and the Court of Session in Scotland may not be a wise thing to do. It almost certainly will be an inordinately expensive process. There will have to be at least five or six wigs on each side of this argument when it gets to that level of debate. If this can be done much more efficiently through the Competition Appeal Tribunal and in a less litigious way then I would support it. However, I will go away and think about that. I suspect that we will have an opportunity at a later stage to deliberate on that, and I may find myself falling in foursquare behind the idea of an appeal to a Competition Appeal Tribunal as opposed to otherwise overworked courts.

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[Lord Borrie]

It is very useful to have the views of the right reverend Prelate the Bishop of Wakefield. He has attached his name to one or two amendments later, so we look forward to further contributions from him. I agree with my noble friend’s wish to ensure that if recommendations made by the adjudicator are not carried forward, he or she can come back to the Bill to see what other action can be taken, including the possibility of financial penalties.

Addressing a question to the Minister rather than to my noble friend, who proposed the amendment, Clause 6 states,

“the Adjudicator may take one or more of the following enforcement measures … recommendations … information to be published … impose financial penalties”.

I wonder whether the Bill already enables the adjudicator to go from one to the other if the first proposal—recommendations—is not accepted, or is it the Minister’s view that he can do only one of those things and not come back and open up lines of discussion as to whether one of the other measures can be taken later?

[Baroness Byford]

My Lords, I am grateful for this amendment. It gives me a chance to seek clarification yet again. My understanding from the noble Lord, Lord Borrie, was that the adjudicator would go choose between (a), (b) and (c). I did not think that it would be (a) or nothing, (b) or nothing, or (c) or nothing. I hope that as it stands it will be able to look at different ways of coming back to it.

I go back to an earlier contribution that I did not come in on. It keeps being said that there is little evidence. It is not surprising that there has not been much evidence in the past; that is why the Bill is necessary. In the past an individual supplier was the only person who could bring evidence. That individual supplier was known and future trading was very difficult.

Only this morning, I was in conversation with a vegetable supplier whom I happened to meet informally. She was telling me that one of the retailers she supplies had agreed a contract which had gone through, but, because the retailer thought that the circumstances were different, it had asked for a rebate on the contract that had been agreed. Surely that is extremely unacceptable. I hope that the Bill will deal with that. The reason that we have not had evidence is that people would not have come forward as the Bill will enable them to do.

[Lord Howard of Rising]

That is precisely what happened to me. I just said, “That’s fine. We won’t supply you any more”, and they said, “Fine, we will pay the full amount”. It is a commercial transaction between two commercial bodies.

[Baroness Byford]

I accept that, and in some instances it is possible, but sometimes with perishables it is not. If you take the contract away, what do you do with the goods? They are already lost. Although I accept my noble friend’s interjection, I do not agree with it because certain things have no shelf life; they are there or they are gone.

[Lord Howard of Rising]

My instance was strawberries, and I assure my noble friend that they have a very short shelf life.

[Baroness Byford]

Yes, but perhaps my noble friend was in a better position than that supplier; there was clearly a problem there.

I welcome the amendment and am glad that we have a chance to debate it. I hope that when we come to later amendments concerning fines, we will be able to strengthen the provisions. I do not know whether that will make this amendment unnecessary—I seek clarification on that, because I do not know the Minister’s point of view. If we fail later to strengthen the whole section on fines, the amendment will be extremely important.

[Lord Knight of Weymouth]

My Lords, I will not add to the excellent case made by my noble friend Lord Browne, but he has my support.

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[The Deputy Chairman of Committees]

I remind your Lordships that if this amendment is agreed to, I cannot call Amendment 46 because of pre-emption.

[Baroness Byford]

I shall speak to Amendment 46, which is in my name and that of the noble Lords, Lord Borrie, Lord Knight and Lord Grantchester. Here we come to the crux of the Bill. I am sure that the Minister has gathered that there is great support for the Bill. A couple of colleagues do not feel that way, but the majority of us want the Bill to succeed. I tabled the amendment because I felt that if the adjudicator has to go back to the Secretary of State, that will delay things. Briefings from the Food and Drink Federation, the NFU, the Federation of Small Businesses and the CLA all support the adjudicator being able to impose fines.

To cite the CLA’s brief, it believes that it should be the sole responsibility and a significant power of the adjudicator to impose financial penalties on large retailers where it is clear that there has been a serious breach of the groceries code and where the other two enforcement actions—making recommendations and requiring information to be published by a large retailer—are inadequate in relation to the nature and size of the breach. Indeed, it may very well be the case that a supplier will not be able to continue unless there is financial redress for the damages caused by the infringement. It believes that the Bill must make it clear that the adjudicator retains the power to impose financial penalties and that awards to those suppliers affected by the breach of the code by large retailers must come from the proposed consolidation fund.

My noble friend has just explained, but I reinforce my concern about delay if the Bill remains as drafted. One of the problems of suppliers is getting paid for things that they have supplied. I go back to the earlier comment of my noble friend Lord Howard of Rising when he said that it is up to the person who supplies to go away. The arrangement that I heard of this morning was done retrospectively. The contract had been agreed, the whole supply had been sold, so they could not say, “No, you cannot have it”, because they had already had it but were changing the ground and asking for a reduction in the agreed payment. They could not take the goods back, because they had been sold.

I am happy to support the lead amendment in the group, but if the Bill is to succeed, it must give the adjudicator the chance to impose financial penalties. Clause 9(1) clearly states, “The Adjudicator may”—it does not say that it must—

“enforce through imposing financial penalties”,

but only if it goes back to the Secretary of State. Is what is proposed the norm or have we taken a new step? Why is there that reluctance to allow the adjudicator to impose fines?

To go back to our earlier debate on appeals, if some form of appeals system is strengthened and if the amendment we debated earlier would assist, the requirement for it to go back to the Secretary of State would be even less needed than under the Bill as it stands.

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Amendment 45 withdrawn.

[Baroness Byford]

My Lords, I think that I have an old Marshalled List. The debate on Schedule 3 stand part is coming later, is it not?

[The Deputy Chairman of Committees (Lord Brougham and Vaux)]

Yes.

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Debate on whether Schedule 3 should be agreed.

[Baroness Byford]

My Lords, I think I am at the right place. I gave notice that we intend to oppose the Question that Schedule 3 be the Third Schedule to the Bill. All of us in the Room have debated this matter very fully this afternoon, and I do not propose to go through it again. I have also heard the response from the Minister that she wished to take it away and think about it. I want it recorded that, at the moment, we are looking to have some alterations to the schedule as it currently stands. I do not know if the Minister wanted to respond but if she could clarify the fact that she will take this away and think about it, I would withdraw my opposition. I hope I am correct.

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[Baroness Wilcox]

We have already discussed the introduction of fines in detail and I made a commitment to discuss that in more detail.

[Baroness Byford]

I am very grateful to the Minister for that reply. In those circumstances, I withdraw my opposition.

Schedule 3, as amended, agreed.