Groceries Code Adjudicator Bill

Debate between Earl of Sandwich and Lord De Mauley

Wednesday 13th March 2013 Lords Chamber

[The Earl of Sandwich]

Having played a very small part in the early stages of the Bill, I want to congratulate the Government on listening. I am not in agreement with the noble Viscount, Lord Eccles. He knows that. I have listened to many NGOs in the farming community and I think he underestimates the feeling out there. It is important that the adjudicator is able to hear from anyone now. It is important that they can initiate investigations based on their own assessment as to whether there has been a breach, and it is also important they have a full set of tools to be able to change retailers’ behaviour. Retailers can be fined and required to take out a newspaper advertisement saying they breached the code. The GCA can provide clarification on how to interpret the code and can recommend changes in its scope. That is roughly the gist of it. I concur with the noble Lord, Lord Knight, that the Commons amendments have been just what was wanted.

[Lord De Mauley]

My Lords, I am grateful to all noble Lords for their contributions, particularly the noble Earl, Lord Sandwich, and the noble Lord, Lord Knight, although I warn the noble Lord, Lord Knight, that he should manage his expectations for the future.

The issue of whether to give the adjudicator the power to impose fines from the outset has always been, as I have said, a finely balanced policy decision. The BIS Select Committee acknowledged this in its 2011 report. We continue to believe that the sanction of requiring a retailer to publish information—the so-called name and shame—will be a powerful one and will suffice in the great majority of breaches. However, the Government have listened carefully to the arguments made in your Lordships’ House, at Second Reading in another place and by third parties that the ability to fine from the outset would help to give the adjudicator more teeth.

Turning to the questions raised by noble Lords, my noble friend Lord Eccles effectively asked why we need an adjudicator at all. He may not have said it in those words but that was the gist of it. I accept that he feels very strongly about this and he has argued his point eloquently here, as he has at previous stages in the passage of the Bill. I hope he will accept that the weight of opinion in both Houses, as well as that of the Competition Commission and the BIS Select Committee, is strongly in favour of the establishment of an adjudicator.

We recognise that supermarkets are a vital part of our economy and that they do much good through increased employment, consumer choice and their own commitment to corporate social responsibility. We also recognise that the groceries sector is generally very competitive.

My noble friend talked a bit about the suggestion that there is a climate of fear. Currently, complaints must be made to the supermarket involved and, given the purported climate of fear to which he refers and which has been indentified among suppliers, this could indeed limit complaints. Very few suppliers would be willing to challenge a retailer on which they are likely to be highly financially dependent. An independent adjudicator to whom suppliers can complain confidentially is therefore essential to enforcing the code.

He asked about how it could help farmers. The adjudicator has a very tightly defined remit. She will enforce the Groceries Supply Code of Practice based strictly on the Competition Commission’s findings that retailers were transferring excessive risk to their direct suppliers. She will therefore not be able to set prices for produce. Similarly, issues arising between farmers and processors will be out of scope. She can only consider interactions between retailers and their direct suppliers. It is important to note that most farmers are not direct suppliers to retailers. Most farm produce tends to be sold to wholesalers, processors or other intermediaries. However, we are confident that by reducing the pressure on direct suppliers the adjudicator will allow them to make longer-term decisions and to increase innovation and investment, which will benefit the entire supply chain including farmers.

My noble friend was also naturally concerned about the prices paid by shoppers when they go to supermarkets, and he said that he would not wish to see the adjudicator’s work leading to increased costs for hard-pressed consumers. I reassure him that the retailers themselves, when giving evidence to the BIS Select Committee, said that the cost of compliance with the code had not led them to raise the prices paid by consumers. Ultimately, this is a pro-consumer measure. The Competition Commission’s 2008 report clearly identified that the supermarket practices that the adjudicator will confront could have a detrimental effect on consumers if left unchecked.

The noble Lord, Lord Myners, raised a question about the financial sector. It was an interesting point, if I may say so. I have a feeling that the financial ombudsman has an important role to play, and I am sure that the noble Lord will make his point again on a perhaps more relevant occasion.

The noble Lord, Lord Knight, essentially raised the issue of a living code. If the adjudicator considers that the code should be changed, then he or she is required by the Bill to make a recommendation to that effect to the Office of Fair Trading. It should be emphasised that this is a narrow duty on the part of the adjudicator. Under the existing provisions of the Enterprise Act, it would then be for the OFT to decide whether to advise the Competition Commission that a variation of the code was appropriate by reason of a change of circumstances. However, these provisions allow for the code to be adapted to changing circumstances in the groceries market to ensure that suppliers are treated fairly.

I hope that that addresses most of the issues raised and I recommend these amendments.

Groceries Code Adjudicator

Debate between Earl of Sandwich and Lord De Mauley

Tuesday 20th March 2012 Lords Chamber

[Lord De Mauley]

My Lords, I understand the noble Baroness’s position. On balance, we think that it would be better to start with the regime that we have proposed. As I said earlier, and as she acknowledges, we may well have to move on to what she suggests, but we would like to consider it further. One advantage of doing that is that we would have the benefit of the adjudicator’s input and experience of deciding on the framework for fines.

[The Earl of Sandwich]

My Lords, why have the Government been so slow in setting up this office? People have been waiting for it for years, and the Minister sounds hesitant about it even now. How long have people got to wait?

[Lord De Mauley]

I am sorry to hear that the noble Earl thinks that I am being hesitant. I do not think that it is reasonable to imply that we have been dragging our heels. The process was triggered in 2008 during the previous Government’s term of office by a report from the Competition Commission. I would not criticise the previous Government for dragging their heels because, in fact, they were getting on with the business of trying to persuade the grocery industry itself to put in place a process. The industry did not do that. We all want to get this right, which is why we have been through a thorough process of pre-legislative scrutiny—and I think that that is something of which noble Lords generally approve.