Groceries Code Adjudicator

Baroness Ritchie of Downpatrick Excerpts

Tuesday 17th November 2015 Westminster Hall

[Julian Sturdy]

I thank my hon. Friend for his intervention. He is absolutely right about looking back at the history. I remember, before the 2010 general election, attending many hustings and talking about a Groceries Code Adjudicator and how it was so important that we brought that forward. I remember, as I am sure a number of hon. Members here will, speaking in the debate on Second Reading of the Groceries Code Adjudicator Bill, and warning then that, while we had to bring that forward, we had to ensure that it had real teeth to act. I feel that it has been a good step forward, but there is much more work to do, and I want to touch on that.

[Ms Margaret Ritchie (South Down) (SDLP)]

I congratulate the hon. Gentleman on initiating the debate. A number of us, including the Chair of the Select Committee on Environment, Food and Rural Affairs, the hon. Member for Tiverton and Honiton (Neil Parish), have already discussed some of these issues, but does the hon. Member for York Outer (Julian Sturdy) agree that the Groceries Code Adjudicator’s remit should be expanded in legislation to include fair and reasonable prices for producers? Many people—not solely in the dairy sector, which has a voluntary code—have been asking for that.

[Julian Sturdy]

The hon. Lady is absolutely correct. I will go on to pay tribute to the EFRA Committee and the work that it has done on this subject. I know that it has forthcoming inquiries on the topic as well. I entirely agree with her. I want to touch on the dairy sector later in my speech, but this issue goes right across the fresh produce sector, and we have to get fairness there.

I was making the point about the sheer scale of the industry and whether the Groceries Code Adjudicator has enough resources to do its job. Why does the adjudicator have a team of only five, and why is the adjudicator employed for only three days a week? Is that because there is not a real problem of the supermarkets using their massive size and resources to abuse their dominant market position? Or is the problem simply not being taken seriously enough, with the result that those are the resources available to the adjudicator?

The powers of the GCA have also been called into question. My hon. Friend the Member for Brecon and Radnorshire (Chris Davies) has touched on this. I remember making a contribution on Second Reading of the Groceries Code Adjudicator Bill, when it was not envisaged that the adjudicator would be able to fine companies from day one. I warned then that, without adequate teeth, the GCA would be like a referee without a whistle. I think that another Member in that debate said that it would be like a referee without a red card in his top pocket. The fear with all new regulatory bodies is that they are set up too cautiously and they become ineffective talking shops, unable to gain influence or authority in the sector. It was therefore a welcome development when, before the Bill’s Committee stage, the Government accepted the argument about giving the adjudicator the ability to fine retailers. Secondary legislation was introduced to give effect to the power to impose penalties on the large supermarkets of up to 1% of their annual UK turnover. That was another positive step forward—a step in the right direction—as the adjudicator requires teeth to send a strong message to the supermarkets that treating suppliers fairly is not optional.

It is deeply unfortunate, however, that the adjudicator’s ability to impose robust fines will come in after the GCA’s investigation into allegations that Tesco overstated its profits by £250 million. Should a breach of the code be found to have occurred, the only possible sanctions will be to name and shame the retailer, which is redundant at best, as the matter has already been widely reported in the media. In the light of the GCA’s limited resources and the late arrival of its powers, it is fair to ask what the adjudicator has achieved in the two years since it was established.

--- Later in debate ---

[Ms Ritchie]

My constituency neighbour will know, as I do, that agricultural produce is critical to our local economy. In that vein, does he agree with me, and with the conclusion of the Ulster Farmers Union, that the Groceries Code Adjudicator should have more power to tackle unfair trading practices, particularly in the dairy sector but also in the red meat and vegetable sectors? That would have an impact on his constituency.

[Jim Shannon]

As always, I am pleased to have accepted an intervention. I note the hon. Lady’s wise words, which outline clearly the issues for my constituency and her constituency, in referring to the unfair trading practices.

We have to value the benefits of supermarkets, as I said earlier. The Competition Commission views the country’s supermarkets as delivering

“a good deal for consumers”.

However, the commission did warn about the impact on suppliers if current practices were to continue—that continuing to produce a quality product at a cheaper than cheap price is unsustainable. It said that

“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.”

In the background information sent to us by the National Farmers Union, there are three examples. Just last week on the TV—I think it was early on Tuesday morning last week—there was a clear illustration of this. A farmer, who I think was from Norfolk, was producing parsnips for Morrisons and had been doing so for years, but he was not getting his price and the company was continuously squeezing him. The problem for him was that it had got to a stage where it was unsustainable. Last week a TV programme carried the story. Morrisons had not replied over a six-week period. Ultimately, he was saying, “I cannot continue after years of the product being purchased at low profit.” This had an impact on him, as he had young sons. He needed to ensure that everything for him was beneficial and cost-effective, but it was not. Whether it is Morrisons, the Co-op or Tesco, those issues need to be addressed. Action must be taken. Relevant powers need to be given to the new ombudsman or eventually to a body that takes responsibility for this issue.

The Competition Commission’s proposed ombudsman would enforce compliance with the groceries supply code of practice. Perhaps the Minister will tell us what extra powers the ombudsman will have to bring supermarkets into line and ensure that they do what they should do. We have to strike the right balance between addressing the abuses of purchasing power by monopolies and allowing legitimate businesses to operate with as little Government interference as possible. That is appropriate, given the serious detrimental impact to suppliers. As I have already outlined, the grocery retailers will be prohibited from making retrospective adjustments to terms and conditions of supply, which are issues that have a direct impact on them.

It is my understanding that the Groceries Code Adjudicator would not have to have, or seek to have, any role beyond what is necessary to monitor and enforce the code of practice. However, with the right approach, and with the teeth that Government can give it, we can, as the hon. Member for South Down and others have said, make the change, make farmers more profitable and help them, as they produce a quality product that in many cases leads the world. They need that profit and that money to continue to be producers.

--- Later in debate ---

[Anna Soubry]

I will deal with that one as well, if I may, because I am reliably informed that the problem for the adjudicator is that, as has been identified, she has no power to address matters falling outside the code, for the following reasons. First, the Government cannot change the code. As hon. Members have made clear in their speeches about the history of the establishment of the Groceries Code Adjudicator, the code came about from the work of the Competition and Markets Authority, arising from an investigation that it conducted into competition. Forgive me for saying so, but once again the clue is in the name and the history: it was all about unfair competition. I must say to the hon. Member for West Aberdeenshire and Kincardine (Stuart Blair Donaldson) that it was never about pricing. If there are to be changes to the code, they can be made only by the CMA.

Also, with great respect to everybody, the 2013 Act was passed by a previous Parliament; it was what Parliament decided. The Government could give the adjudicator additional statutory duties outside the code, but that would involve amending primary legislation and it would have to be debated in Parliament. There is nothing wrong with that, but just so everybody understands: new legislation would be needed.

[Ms Ritchie]

As part of such a review, would the Minister consider allowing the adjudicator more freedom within legislation to launch investigations on her own initiative?

[Anna Soubry]

The adjudicator already does that, as I have said, but it must be within the terms of the code, and those terms do not include pricing. I have huge sympathy for the dairy industry—in fact, I think it is important that I say that my mother’s family were dairy farmers and my partner is a non-executive director of Morrisons. I just want to put all my background on the table, so to speak, in case anyone listening to or reading this debate queries my own background. As everyone here knows, I am my own woman; nobody influences me—and some would complain about that. Of course, I always listen to hon. Members and the good arguments that they make, but I am my own woman, whatever my family’s interests may be. Although I am sympathetic to the plight of the dairy farmers, the Groceries Code Adjudicator is not the way to fix the problem.

Steel has been mentioned, but the problem with the steel industry is much the same as the problem with the milk industry at the moment: there is a flood of cheap steel and a flood of cheap milk, which is why prices have fallen. And of course, as everybody knows, when we make the case in whatever part of the agriculture sector it might be and we complain about tumbling prices and the problems that they create for our wonderful British farmers and their excellent products, the problem is that it means we go against the interests of many of our constituents and the other people who buy food at low prices. Of course, if prices were to rise for the farmer, the person who would pay the extra money is the consumer. And full credit to those supermarkets that have said, “We are going to put more money on, because we want to support our dairy farmers.”

Sadly the clock is against me, but it is really important that everybody realises that the Groceries Code Adjudicator’s remit cannot be extended without primary legislation, which would mean going into a different area. It was certainly thought at the time the adjudicator was established that this was the right route to go down.

I apologise that I have not been able to deal with all the excellent points that have been made, but I assure you, Mr Gray, that, as has been asked of me, we will publish details of the review. I look forward to Christine Tacon, who is excellent, giving evidence to the Environment, Food and Rural Affairs Committee, which can make a full inquiry into her work.

Question put and agreed to.

Resolved,

That this House has considered the role and powers of the Groceries Code Adjudicator.