Groceries Code Adjudicator Bill [Lords]

Adrian Bailey Excerpts

Monday 19th November 2012 Commons Chamber

[Jo Swinson]

I thank my hon. Friend for his intervention and for his support for the Bill. The code is already legally enforceable by suppliers should they take legal action, but yes, it will also be legally enforceable by the adjudicator, who will make recommendations to supermarkets, which will recognise that they have a legal duty to comply with the code as it is. If the adjudicator thinks that they are not complying with the code, I suspect that that will be taken as a clear sign that they need to change their behaviour.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Will the hon. Lady give way?

[Jo Swinson]

I will certainly give way to the Chair of the Business, Skills and Innovation Committee.

[Mr Bailey]

I thank the hon. Lady; I recognise that she has given way several times already. I delayed my intervention to see whether she would give the answer I was looking for in response to somebody else.

One of the recommendations of the Select Committee on Business, Innovation and Skills was that evidence be allowable from trade associations and other third parties. In the other place, the Minister gave that specific assurance and we welcomed that as a Committee. However, I cannot find anything in the Bill that spells it out. All I can find is clause 15(10), which gives the Secretary of State the right to insert after clause 4 proposed new section 4A, which under subsection (2) will enable the adjudicator to consider any appropriate information. Is that the legal base that underlines the right of the adjudicator to take evidence from a third party? If so, can the adjudicator do that before the two-yearly review specified as the basis for the Secretary of State’s introduction of it?

[Jo Swinson]

I will happily confirm the reference in that clause:

“When carrying out an investigation the Adjudicator may consider any information that it seems appropriate to consider and is not limited to considering the information mentioned in subsection (1)”—

subsection (1), of course, lists a range of places from which information could be provided. The point of that phrasing is to ensure that the adjudicator has flexibility in considering information from whatever source. That includes, but is not limited to, information from trade associations, as the Chair of the Select Committee mentions, from a whistleblower, or others who might have concerns or evidence of malpractice about compliance with the code. We do have—

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[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I first declare an interest. I am a Labour and Co-operative Member of Parliament for West Bromwich West, and the Co-operative party is financed by and linked to the co-operative retail movement, which is both a major retailer and a major farmer, so it is involved in both sides of the argument.

I pay tribute to the many Members who have worked on the issue over the years and brought it to this point. As Chair of the Business, Innovation and Skills Committee, which played a significant role in making the recommendation that is being adopted today, I cannot but reflect on the irony that I, a Member who represents one of the most industrialised manufacturing constituencies in the country, have suggested proposals that are so significant to the farming and rural community. Perhaps that is a reflection of one of the strengths of our democracy.

I welcome the Bill. In paying tribute to those who have worked on the issue, I mention my hon. Friend the Member for Ynys Môn (Albert Owen), who promoted a private Member’s Bill, the Grocery Market Ombudsman Bill. It is also appropriate to mention the hon. Member for St Ives (Andrew George), notwithstanding anything he might say in response to my comments. The Chair of the Environment, Food and Rural Affairs Committee was also kind enough to do some work and feed it into our deliberations. I have also read the debate held in the other place, and its Members explored the issues thoroughly.

A lot has been said about the delay. I do not want to get involved in a party political argument, but the previous Labour Government were castigated by members of the current Government for deeming it reasonable to see how the grocery code would work in practice before legislating. Last year, the BIS Committee was invited, as a matter of urgency, to undertake its pre-legislative scrutiny, which we completed by the recess, and the delay in implementation since then has caused some bodies to raise concerns about the Government’s commitment to the measure. I am satisfied that they are committed to it, but they still need to examine some flaws closely; otherwise, those concerns may continue to prevail in some sectors of the industry.

On the Bill’s proposals, I am pleased to say that the Government have accepted about 80% of the amendments suggested by the Committee as a result of its pre-legislative scrutiny. It would be churlish not to recognise the Government’s willingness to listen to arguments and to take our proposals on board. I think that both industries will be strengthened as a result of the Bill. It is important to recognise that we are talking about two of our most successful industries. Our retailing industry is phenomenally successful and a model to be copied the world over. Similarly, our farming is among the most highly productive anywhere in the world.

It is undoubtedly true, however, that there has been an imbalance of power, and examples of the abuse of that power have been to the detriment of the producers, particularly the farming industry. Unless addressed, that in itself will have implications for the ability of that industry to introduce new products and innovate. By addressing the issue and redressing the balance, we will strengthen the supply to our retailing industry in the long term, and that will be to the benefit of both industries.

Many hon. Members have already highlighted the main area of disagreement between the Committee and the Government, namely whether the Bill should include the power to fine. The Minister said that the Committee had acknowledged that the arguments for and against that power were fairly even, but what she did not say was that we came down on the side of advocating fines. Some of the arguments in favour of fines have already been made. I think the Government’s approach has been to assume that the publication of evidence that could damage a supermarket’s brand in a highly competitive market could mean that supermarkets risked losing trade and profitability.

It is difficult to work out what the precise implications of the publication of evidence of a breach of the groceries code would be. It might be published in a press release, in the retailer’s annual report or on the retailer’s website. However, I have the gut feeling that relatively few consumers, particularly in these hard-pressed times, will change their shopping habits as a result of a retailer breaching the groceries code. That just does not ring true.

[Fiona O’Donnell (East Lothian) (Lab)]

In many constituencies, such as mine, which is predominantly rural, people only have a choice between two of the major supermarkets.

[Mr Bailey]

My hon. Friend makes an important point, which I was going to come on to. An individual’s shopping habits are determined by all sorts of factors. I do not know what evidence there is, but I would guess that the perception of value for money at different retailers is an important criterion. Other factors are accessibility and personal habits and traditions. I do not see that the publication of an adverse report by the groceries code adjudicator about a particular retailer would affect many people’s shopping habits and, therefore, the bottom line of that retailer.

[Mr Spencer]

Does the hon. Gentleman recognise that the opposite might be true, in that a supermarket whose brand is built around price point might gain kudos from squeezing its supply base so tight that it can deliver the lowest prices to the consumer?

[Mr Bailey]

The hon. Gentleman makes an interesting point. I am sure that one could develop an argument along those lines. I hesitate to do so because I have an innate faith in good will and do not believe that a supermarket would be so unscrupulous as to do that. Perhaps he does not share my innate faith in the good will of supermarkets.

[John McDonnell (Hayes and Harlington) (Lab)]

The best example of that is that when the Competition Commission found that a supermarket was reducing the price of bread to 7p, which was below cost price, that supermarket gained a boost in sales.

[Mr Bailey]

That is a form of advertising that could, in certain situations, benefit a retailer.

It is simplistic to believe that the possibility that the Secretary of State will implement fines will be a sufficient deterrent. Even if the Secretary of State feels that it is appropriate to levy fines, the process for arriving at that point is slow and cumbersome. Under schedule 3, before the Secretary of State can make such an order, he must consult six bodies, plus any other body that he feels it appropriate to consult. That is a time-consuming and possibly self-defeating process. It is a slow and ineffective way to implement the deterrent on the retailer, which could be exploited considerably.

I also find the Government’s approach rather strange in respect of the escalation of penalties. The adjudicator can take notice of the failure of a supermarket to respond to highlighted breaches of the code, but seems to have no enforcement powers to do anything about it. There is no express sanction for non-compliance with a recommendation, but it may be taken into account when further arbitration is carried out. That is hugely time-consuming and amounts to an invitation to ignore the adjudicator. I cannot help but reflect on the danger identified by Murray Worthy of War on Want:

“A watchdog that is all bark and no bite won’t be able to stop supermarkets bullying their suppliers.”

I will move on briefly to a couple of other issues. The Business, Innovation and Skills Committee reflected on intermediaries at some length. We said that third parties, such as trade associations, should be able to give evidence to initiate an inquiry. The Ministers seem to have accepted that point and my intervention earlier elicited the sort of response that I wanted. I emphasise that this issue is extremely important and that there should be no delay in the adjudicator being able to implement such provisions.

Lastly, I have a request. Given the importance of the adjudicator, I hope that the Government will allow the Business, Innovation and Skills Committee to hold a pre-appointment hearing with the proposed adjudicator. Given that the Select Committee was entrusted with the pre-legislative scrutiny and given the concerns that have been echoed in all parts of the House, I feel that it is important for the Select Committee to have the chance to question the adjudicator to ascertain whether we feel that they will apply the rigour and forensic examination that are needed to deliver what everybody in the House wants.

There is a huge groundswell of support from all parties for the Government to consider fines. Although I recognise that the Bill is very significant as it stands, I hope that the Government will listen to the voices from all parts of the House and table an amendment at a subsequent stage to ensure that there is a power to levy fines. That would make a good Bill into a very good Bill indeed.

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[Mr Heath]

I was about to move on to that, and it is a great shame that the hon. Gentleman took up some of the time I was going to devote to it.

[Mr Bailey]

rose—

[Mr Heath]

No, I will not give way.

I want to talk very briefly about the voluntary code in the milk supply chain, which I think is an important development. It would not be policed directly by the adjudicator, and I do not want to give the impression that it would.

Let us talk about sanctions. This is clearly a serious conversation we need to have in Committee and on Report. My hon. Friend the Under-Secretary set out the Government’s position on naming and shaming. I do not entirely agree with the hon. Member for Ogmore, because I think that naming and shaming played a significant part in events over the summer relating to the dairy industry. I think that several of the large retailers were directly shamed by consumers into changing their tune about their intended reductions in the price of milk.

However, I accept that many Members have indicated that they would prefer to see fines from the start. There are arguments about why that should not be the case, including the fact that it would introduce a new legal process of appeal that would not be there if it was not introduced ab initio. I want to make it absolutely plain that only one thing has to be done by order, which is for the Secretary of State to bring in a tariff system on the advice of the adjudicator, so it is not a separate process for each infringement.

[Mr Bailey]

rose—

[Mr Heath]

I am sorry, but I really cannot give way at 9.58 pm.

Let us discuss what the effective sanctions are and make sure that we have got them right. The Government believe that we have got it right at the moment, but of course we will listen to what every Member has to say on the issue and ensure that we have legislation that is fit for purpose.

In closing, I think that we have had a very important debate. It means that we can go forward, perhaps not as heroes, as the hon. Member for Ogmore suggested, or as characters from grocery folklore, as the hon. Member for Ynys Môn said, but with something that will contribute to the well-being of our farming and retail industries. I believe that is right and commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.