Groceries Code Adjudicator Bill [HL]

Baroness Williams of Crosby Excerpts

Tuesday 22nd May 2012 Lords Chamber

[Lord Borrie]

My Lords, I must declare an interest as a former director of the Office of Fair Trading. Unusually, I am able to thank the noble Baroness, Lady Williams of Crosby, who is in her place today, because she appointed me to that post when she was Secretary of State for Prices and Consumer Protection back in 1976.

[Baroness Williams of Crosby]

I may say, simply, that it was a good choice.

[Lord Borrie]

I ceased to be director in 1992, and I need not therefore disclose my current interest—I do not have one.

I generally welcome the Bill because it is designed to deal with a real problem, many of the details of which have been mentioned by previous speakers, and provides a remedy to limit the market power of the top 10 major supermarkets—a power that they have over the supplier, whether the supplier is a farmer or a food producer of some other kind, who normally has, or often has, much less bargaining strength at their elbow. A groceries code was promoted by the Competition Commission and agreed to some years ago by supermarkets, requiring them to deal lawfully and fairly with their suppliers. However, it was not until 2008 that the commission proposed an adjudicator to enforce the code.

The Bill is the Government’s welcome and positive response to the commission’s proposal. It is intended that the adjudicator will be appointed by the Secretary of State and operate from within the Office of Fair Trading, sharing premises and back-office facilities. Under another Bill that is imminent and will come before us soon, the Office of Fair Trading is to be merged with the Competition Commission. No doubt, it will be then that the adjudicator will be housed within the new combined Competition and Markets Authority.

Perhaps it is too late to raise the following point, but I do so in part because my noble friend Lord Haskel spoke of the cumbersome nature of some of the provisions in the Bill. I am not at all sure why there was a need at all to go to the lengths of creating an adjudicator under a special statute as a separate so-called “corporation sole”, plus a deputy adjudicator, as the noble Baroness, Lady Byford, mentioned, instead of simply giving the power and responsibility under the Bill to the Office of Fair Trading or its successor organisation. Why have a completely separate organisation with apparently separate back-up facilities? I certainly see no case for adding further to this special statutory creation by providing for a right of appeal, as some organisations, such as the British Retail Consortium, have been arguing.

Under the Bill, the supplier will be enabled to make a confidential complaint to the adjudicator and, more controversially, third parties such as trade associations— be it the National Farmers’ Union or the British Retail Consortium—may also make complaints. If the adjudicator finds on investigation that a breach of the code has occurred, he may make recommendations. As we have heard several times, he may name and shame as appropriate, but he may not impose fines unless the Minister agrees that other remedies are not working. If that is the case, the Minister then has to introduce secondary legislation afresh, which requires the affirmative resolution of both Houses of Parliament before the financial penalties can be exercised by the adjudicator. I do not think that I am the only person who feels that such a power is, unfortunately, not provided in the Bill. Why not? If it was provided for in the Bill, why should not the adjudicator, who surely we are meant to trust from the outset—it would surely be a good appointment, and all the rest of it—be able to decide from day one of his statutory existence whether a fine is justified in a particular case?

One limitation on the adjudicator’s powers made me wonder. The noble Lord, Lord Palmer, who is not in his place at present, thought that “ombudsman” was a suitable alternative word for the adjudicator. That is not at all appropriate on the basis of what is in the Bill. The serious limitation on the adjudicator’s powers is that if on investigation he finds that a large retailer has broken the code, and the breach affects a particular supplier, the finding will not constitute a determination of liability of the retailer to that supplier. That is specified in the Explanatory Notes and seems to be perfectly clear. It therefore seems odd to refer to the adjudicator as an ombudsman because ombudsmen decide complaints between two businesses, or between one individual and one business. Under the Bill, if the supplier wants a civil remedy—if he wants damages or compensation for some behaviour of the supermarket—he must make his own claim in the courts or by way of arbitration. As I read it, although I would be happy to be corrected, the person who cannot do the arbitration is the adjudicator; he would be regarded as having a conflict of interest, having previously done the investigation.

I am assuming that, under the Bill, the price the supplier has to pay for being able to make his complaint anonymously is that he cannot bring a civil claim. There would be a serious disadvantage in the whole system envisaged in the Bill if the complaining supplier had to identify himself in the complaint right at the start. That would seriously jeopardise his ongoing relationship with the supermarket, as others have said. However, if the identity becomes known in the course of the adjudicator’s investigation, would not the basis of disallowing the adjudicator from determining the supermarket’s civil liability to the supplier disappear? Certainly, there are some disadvantages in having not only the adjudicator but some civil court or third-party arbitrator going over the same ground, the same evidence, all over again, preventing the adjudicator from dealing with the civil claim and, indeed, behaving like an ombudsman. That would be unfortunate.

Finally, I add a point which has been referred to by others. Under Clause 19 the adjudicator may request a levy on all large retailers to cover the expenses of the new office. Would it be more appropriate to make such a levy mandatory?