Groceries Code Adjudicator Bill [Lords]

Andrew George Excerpts

Tuesday 26th February 2013 Commons Chamber

[Philip Davies]

I understand the point that the hon. Gentleman makes, but he is basically highlighting that he can give no examples of abuses of the groceries code of practice.

[Andrew George (St Ives) (LD)]

I respect the consistent position that the hon. Gentleman takes on this matter. However, he cannot ignore the fact that in 2008, the Competition Commission concluded that supermarkets were transferring excessive risk and unexpected costs to suppliers, and that that was having a detrimental effect not only on the suppliers, but on consumers. It proposed the introduction of the code, but made it clear that on its own, the code would not be sufficient. A referee was needed to enforce it, otherwise no complaints would be brought forward. Simply saying that we have to find the evidence ignores the Competition Commission’s conclusions.

[Philip Davies]

The hon. Gentleman, likewise, has taken a consistent view on these matters. In fact, he has been so consistent that he wanted an adjudicator before a new code of practice had even been introduced, let alone bedded down. He has always been in favour of this solution, even when there was no problem.

The Office of Fair Trading controls the groceries code of practice and is there to investigate any abuses of fair trade within the sector. If the hon. Gentleman has any evidence, he can take it to the Office of Fair Trading. It has all the powers that it needs to investigate any cases. The problem is that there are no such examples.

[Andrew George]

I am grateful to the hon. Gentleman for giving way again. The Grocery Market Action Group, which I am privileged to chair on behalf of a large number of organisations, gave evidence to the Competition Commission inquiry. That is one reason why it came forward with the clear and firm conclusions that are now being carried forward by the Government. That is the right thing to do.

[Philip Davies]

The hon. Gentleman keeps making the same assertion. He should take the matter to the Office of Fair Trading. That is the body that oversees the groceries code of practice.

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[Philip Davies]

My hon. Friend asks a good question and strikes at the heart of why the Bill is a nonsense. There is no evidence that the groceries code is being abused. Nobody has yet been able to come forward with any such case. They all give reasons why they cannot do so, but the fact remains that there are none. There is no evidence that the code is not being applied properly.

[Andrew George]

As the competition authorities have repeatedly found, there is a significant climate of fear in the sector. That is why it is highly unlikely that anyone will use the code until the adjudicator is in place. I ask the hon. Gentleman to look at clauses 4, 10 and 12 in particular, which should give him the reassurance that I believe he is looking for. Potentially powerful suppliers will not abuse their power, because of the reasonableness that is a golden line running through the Bill.

[Philip Davies]

I am grateful to the hon. Gentleman, but again, I do not want to get on to parts of the Bill that are subject to amendments in future groups, so I will resist that temptation.

Supermarkets can operate properly only with the good will of their suppliers. There are often cases in which, for example, a supplier has a problem at short notice—we have seen that recently with the issue of horsemeat. Things have to be taken off sale at short notice and production dries up quickly. That happens when foreign bodies are found in certain products, which have to be taken off the shelves. A supermarket can operate only if it then has other suppliers that it can go to and ask to fill the void at short notice. It goes to another supplier and says, “We’ve got some empty shelves and a lack of supply. Can you come and help us out?” Do people really think that the supplier would help out a supermarket chain that was trying to bankrupt it or screw it into the ground? Of course it would not.

My hon. Friend the Member for Sherwood made the point that the limits in my new clauses may impede small business at some point in future. However, new clause 2 specifies a turnover of £1 billion a year, and all I can say is that, my word, supermarkets must be a force for good if they can turn small and medium-sized enterprises into firms with a £1 billion-a-year turnover. That should be something to celebrate, not to criticise supermarkets for. Suppliers would be delighted to be companies of that scale. I am not entirely sure which ones in his constituency he is thinking of, but if he has any examples of firms that he is worried may have a turnover of £1 billion a year, I would like to meet them to find out what their fears are.

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[Huw Irranca-Davies]

rose—

[Andrew George]

rose—

[Philip Davies]

I am going to make some progress. These are the same Members who were happy for the debate on three groups of amendments to be restricted to three hours, and they now want to try to prolong the debate for as long as possible. If they still want to intervene at a later point I will try and allow it, but I am sure other Members want to speak.

The Bill was sold on its supposed support for small suppliers. If that is what it is about, let us make that support clear in the Bill. New clause 1 states that the adjudicator could not have cases referred to it by, or on behalf of, companies with a turnover exceeding £500 million a year. New clause 2 is exactly the same, but puts the figure at £1 billion a year. To try to be as helpful as possible, I have done some investigation to try to work out what sort of companies would be covered by my new clauses, so that we can see what we are talking about. Perhaps the Minister will be able to tell us whether the purpose of the Bill is to help those companies.

Returning to my point, suppliers hope the Bill will help their bottom line. If it does not, as a company there is no point to it. That is what they are hoping for. Who pays for an increase in the bottom line of a supplier? It will not be the supermarkets. I am sure the Opposition believe the idea that supermarkets’ profits are going to be eaten into, that there will be some kind of magical transfer of wealth from the supermarket to the supplier, and that the supermarket will give up its profits and it will all feed through and go to the small farmers. It does not work like that. What will happen is this: supermarkets work to very, very low margins. The whole purpose of supermarkets is to cut the price and increase the volume—that is how they look to increase their profit. If there is a benefit to the suppliers’ bottom line it will only come from one person: the consumer. Consumers will end up paying more for their products—that is what the Bill will deliver.

If people want to tell their constituents that they are voting for them to pay more for their products, I am happy for them to do so—at least it would be honest, at least they would be saying, “Look, because we want to look after suppliers, you’ll have to pay more for your shopping, but we think it’s a price worth paying.” I would respect that. It is a perfectly respectable view.

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[Philip Davies]

We all know that that is the case, but my point is that if companies such as Heinz, Walkers, Nestlé or Coca-Cola feel that a supermarket has breached a contract with them, they can take the case to court. We do not need the state to set up an adjudicator to decide which side is right. As it happens, I am quite relaxed about supermarkets trying to screw those big suppliers into the ground to get the best possible deal. Those suppliers are making massive profits, and I would prefer to see that money benefiting my constituents rather than adding to the bottom line of those multinational companies.

[Andrew George]

rose—

[Philip Davies]

I will let the hon. Gentleman explain why he wants to add to the bottom line of those multinational companies.

[Andrew George]

The hon. Gentleman is, in truth, arguing for the abolition of all the competition authorities. That seems to be the direction that his argument is taking. In fact, clause 4 makes it clear that the decision to investigate would be made if the adjudicator had reasonable grounds for suspecting a breach of the code, and clause 10 makes it clear that any supplier who brought a complaint that was “vexatious or…without merit” would be required to pay some or all of the costs involved. Paragraph 48 of the Competition Commission’s final report stated that it envisaged that the groceries code adjudicator

“would prioritize the resources of its office to focus on those disputes and complaints concerning suppliers without market power over and above those concerning suppliers of major branded products that have market power.”

It is clear that such decisions must be made by the adjudicator, and I am perfectly content that the Bill has the capacity to ensure that that description—

[Mr Speaker]

Order. I am loth to interrupt the hon. Gentleman in mid-flow, but interventions seem to be becoming progressively longer. There is no problem about their frequency, but there is about their length. We must now hear from Mr Philip Davies.

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[Sir James Paice]

The honest answer is that, no, I did not come across such evidence, but it may well have been happening and I just did not know about it, because, as my hon. Friend the Member for Shipley rightly said, those very big suppliers can look after themselves. I am not arguing against what has been said. Indeed, I would have had some sympathy for new clause 2 and the £1 billion threshold if I thought my hon. Friend’s motives were justified, but as a result of the rest of his argument I completely lost any support for it that I might otherwise have had. I also think the Bill as currently drafted will militate against big organisations acting in such ways. The Bill is designed to deal with problems that we all agree arise, and which tend to fall on small and medium-sized enterprises.

[Andrew George]

I entirely endorse my right hon. Friend’s comments. Following the logic of the arguments advanced by the hon. Member for Shipley, the conclusion we would draw is that the Bill should look both ways, as it were. I have drawn that conclusion and would like the Bill to reflect that, by seeking to ensure there is fair dealing across the supermarket supply chain, so that if a supplier became too powerful, complaints could be made the other way.

[Sir James Paice]

My hon. Friend is entirely right.

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[Mr Spencer]

Again, there is a misunderstanding of what will happen. We are talking about very large companies that are negotiating with very large companies. They both have an equal amount of commercial muscle, so no one party will be able to bully the other. That is quite important. The adjudicator is meant to get involved as a referee and negotiate when one large party abuses a smaller party and uses its commercial muscle to push something through.

[Andrew George]

I support the arguments that my hon. Friend is making. He knows that this is a dynamic and creative market in which a number of intermediaries and subsidiaries have been created with a turnover of more than £1 billion, which could be used as a means of sidestepping the legislation if new clause 2 was accepted.

[Mr Spencer]

I recognise that. I pay tribute to the hon. Gentleman, who has worked on this matter since before I became a Member. Perhaps that is something that the adjudicator could look at as we move forward. There is this ability to put a film between parties and cause an issue. That comes back to small suppliers, who supply the middlemen.

New clause 3 would cause the Bill to expire after seven years. It would be disappointing if it did so. Using the analogy of a football match, if we get to half time and the referee has not needed to issue a yellow card, no one suggests that we do not need a referee in the second half.

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[Andrew George]

Following the contribution from the hon. Member for Ogmore (Huw Irranca-Davies), may I say that despite the consensus, which is often considered a weakness, the Bill is an excellent example of how a measure can be significantly improved during the parliamentary process?

In congratulating the many people who have been involved in the Bill’s progress, my hon. Friend the Minister of State may have left out the Minister of State, Department of Health, my hon. Friend the Member for North Norfolk (Norman Lamb). During his brief sojourn in the Department for Business, Innovation and Skills, he introduced a very significant change, which enabled the adjudicator to initiate an inquiry on the basis of market intelligence.

I add my thanks to all those involved. The hon. Member for Edinburgh South (Ian Murray) has been very kind, and I hope I did not bite his hand off when he was offering those thanks. I should also like to thank the previous Member for South East Cornwall, Colin Breed, who highlighted the issue more than a decade ago. There are many more people who should be thanked. I have met the adjudicator-elect, Christine Tacon, and was very impressed.

If the supermarkets have nothing to hide, they have nothing to fear. They should embrace this, because I believe that the adjudicator can do something to improve fair trading in this country.