Groceries Code Adjudicator Bill [Lords]

James Paice Excerpts

Tuesday 26th February 2013 Commons Chamber

[Philip Davies]

I will try to put it more simply for the hon. Lady’s benefit: I do not agree with the Bill, as I think I made abundantly clear—I did not want to mislead anybody. If we are to have a Bill, however, I want it to focus on the people I think she had in mind when she decided to support the Bill. If anybody wants to intervene and say that when they had the idea of supporting the Bill, the first company they had in mind was Esso, let them do so.

[Sir James Paice (South East Cambridgeshire) (Con)]

rose—

[Philip Davies]

I thought my right hon. Friend was in favour of farmers, but he is obviously in favour of Esso.

[Sir James Paice]

It pains me to have to point out to my hon. Friend that petrol is not a grocery and is not covered by the code, so he is making a completely spurious point.

[Philip Davies]

I am grateful to my right hon. Friend. Perhaps then we can move on to Procter & Gamble. Would it be covered by the Bill? Is that a spurious point too? When he supported the Bill and was telling his farmers how marvellous it was that the Government were supporting an adjudicator, did he say to them, “By the way, the biggest suppliers will have the greatest opportunity to benefit and could clog up the adjudicator with complaints before you get your own complaint heard, and one of those companies is Procter & Gamble”? Did he tell them that that was the sort of company he had in mind? No, I do not think he did.

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[Sir James Paice]

I listened carefully to what was said by my hon. Friend the Member for Shipley (Philip Davies). I fully accept the logic of saying that there are some very large food producers in the world whose market dominance is such that they do not need the protection of the Bill. However, I think that a careful reading of it demonstrates that it will ensure that the instances cited by my hon. Friend will not actually come to pass. I remind him of my earlier point—which was endorsed, in different terms, by the hon. Member for Ogmore (Huw Irranca-Davies)—that this was purely about the groceries code adjudicator. Many of the businesses listed by my hon. Friend may be only partly involved in groceries. For instance, a number of the products of Procter & Gamble, about which he spoke at length, are not grocery products. Moreover, the trading arms of big multinational conglomerates are likely, as individual suppliers, to be much smaller organisations.

Let me now deal with a point of principle raised by my hon. Friend. He sought to pour scorn on those of us who are also Conservative Members, but who support the Bill. He said that he was entirely in favour of a free market. I too am in favour of a free market, but I also believe in a fair market. If we took the definition of a free market to its extreme, which my hon. Friend came close to doing, we would end up with a single retailer and a single supplier, because that it is the eventual aim. The game of Monopoly is the arch-example of a total, unfettered free enterprise. I strongly believe, not that markets must be regulated, but that when there is a clear imbalance in a market, some element of fairness is necessary. I remind my hon. Friend that one of the great market philosophers, Adam Smith, said that a true market was one in which there were equal numbers of suppliers and purchasers.

[Justin Tomlinson]

That is the point of new clause 2. It would focus time, resources and attention on the suppliers whom we need to protect in order to ensure that there is no monopoly from their point of view.

[Sir James Paice]

I will come to that specific point, but let me first deal with the more philosophical point raised by my hon. Friend the Member for Shipley, who made it clear that he did not consider those of us who share these Benches with him to be true Conservatives if we supported the Bill. I wish to rebut that view. The Bill is necessary because—as has just been suggested by my hon. Friend the Member for North Swindon (Justin Tomlinson)—notwithstanding what was said by my hon. Friend the Member for Shipley, there are plenty of examples of supermarkets exceeding what I believe to be fair terms of trade.

During my time as a Minister, I had a number of meetings with supermarket chief executives, either alone or in a group. Most of them—and, indeed, other senior directors and officials from supermarkets—would argue, as has my hon. Friend the Member for Shipley, that there is no need for the Bill, and that they are already doing everything fairly, above board and properly. I can only conclude that many chief executives do not know what is being done in their names by people operating much further down the chain. Reference has been made to buyers. Since the code was introduced in 2010, there have been numerous examples, some quite recent, of suppliers being verbally required by supermarkets to use a nominated haulier, even though the supplier may be able to find an equally good and competent haulier to do the job for less money. There are also examples of supermarkets seeing that a supplier has made a certain amount of profit in one year, but instead of saying to them, “We think you’re being excessive and therefore we should pay you slightly less for your product next year,” which we could all accept, they say they want a cheque now—today—for £1.5 million or more before they will even consider doing business with that supplier next year. That is not acceptable; it is not a moral way of doing business, which is why I strongly believe the supermarkets need to be investigated. The debate has understandably ranged over a number of different types of commodities, but the most glaring examples of these practices have been in the fresh produce sector.

My hon. Friend also said that having a supermarket adjudicator would be a waste of time if it turned out that he had nothing to do. My attitude is different. I would be delighted if the adjudicator had nothing to do, because it would demonstrate that everything was being done in accordance with the code and that all suppliers were being treated fairly—although I have to tell my hon. Friend that I do not believe there is any chance whatever of that being the case. Indeed, a number of cases are already being brought forward for the adjudicator to deal with, and I have described a couple of them. I think the threat of such action may well prove to be the answer to our problems, but it is wrong to suggest that there is no need for an adjudicator on the basis that the code is in place, as it is clearly not enforceable through the Office of Fair Trading.

My hon. Friend also seems to ignore the point made by my hon. Friend the Member for St Ives (Andrew George). The Competition Commission’s reason for all this was to look after the consumer. The whole thrust of its argument was that shifting risk from the retailer to the supplier was putting the long-term interests of the consumer at risk, with the result that while items may be cheaper today, they may be far more expensive in future, or the supply chain may no longer exist. That is not in the long-term interests of the consumer.

[Philip Davies]

I will ignore the nonsensical—and, to be frank, idiotic—point that this measure will be of benefit to consumers. My right hon. Friend said he would be happy for the adjudicator to have nothing to do. Will he tell us how much the adjudicator is going to be paid?

[Sir James Paice]

I do not know, because it has not been made public. That is a complete irrelevance, however. It is not a reasonable argument, because the situation in this case is the same as it is for judges: if everybody obeyed the law, we would not need any judges, but we would still have them, just in case. There is ample evidence that there will be cases for the adjudicator to adjudicate on, however. The Bill contains a number of limiting provisions, too: the adjudicator can decide not to take up a reference; the adjudicator can fine somebody if the reference has no serious foundation; and the adjudicator’s job is only to arbitrate on alleged breaches of the code, which is quite a narrowly drawn document. I strongly believe the Bill is right as drafted.

[Gavin Shuker (Luton South) (Lab/Co-op)]

The right hon. Gentleman acquired extensive knowledge of the food sector in his time as a DEFRA Minister. As this new clause addresses the balance of power between suppliers and retailers, I wonder whether in his time as a Minister he came across any evidence that big suppliers were putting downward pressure on retailers in the way the hon. Member for Shipley (Philip Davies) has advanced.

[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.

[Mr Bone]

I have been listening to my right hon. Friend’s speech very carefully, as it serves to balance the debate. I am very attracted to new clause 2. The Bill is designed to look after the small guy and not the big guy. How would accepting new clause 2 present a problem?

[Sir James Paice]

It is entirely for the Government to decide whether to accept new clause 2. It does not cause me a huge problem, but I believe it to be completely unnecessary for the reasons I have described. Nothing I have said could be deemed to suggest I am against it, but I just do not see any need for it. I certainly believe, however, that there is a very real problem that needs to be addressed, and this Bill seeks to do precisely that. That is not the basis on which my hon. Friend the Member for Shipley proposes his amendments, however; as he has said, he does not agree with the Bill at all. I do agree with it, and I would like its provisions to become law as soon as possible.

[Ian Murray]

It is a great pleasure to follow the right hon. Member for South East Cambridgeshire (Sir James Paice). As his contribution shows, we have a cross-party and cross-House consensus on this matter, and we should take it forward.

Amendment 28 provides that when the adjudicator publishes guidance, she must include guidance about which law applies to arbitration and where the arbitration should be conducted. That is particularly important where there are suppliers from remote parts of the United Kingdom. Article 11 of the Groceries (Supply Chain Practices) Market Investigation Order 2009—that rolls off the tongue—provides for a dispute resolution scheme. The scheme provides for the application of certain arbitration rules, with London as the default location for any arbitration. Clauses 12(5) and 12(6) of the Bill make provision for the amendment of the scheme and the application of the Arbitration (Scotland) Act 2010 to arbitrations carried out by the adjudicator. However, it will be important for suppliers and retailers alike to be given statutory guidance on the law applicable to arbitrations and the choice of location for arbitration. Our amendment would require the adjudicator to issue such guidance.

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[Huw Irranca-Davies]

I am happy that I have made the case extensively.

[Sir James Paice]

Will the hon. Gentleman give way?

[Huw Irranca-Davies]

I would love to give way to the right hon. Gentleman as long as he does not seek to draw me in to contravening your guidance, Mr Deputy Speaker.

[Sir James Paice]

I do not know why on earth the hon. Gentleman thinks that I might want to draw him into confrontation with you, Mr Deputy Speaker.

I want to challenge the hon. Gentleman on a more fundamental aspect of the amendments. In an earlier intervention on my hon. Friend the Member for Shipley (Philip Davies), the hon. Gentleman rightly made the point that the whole Bill is about enforcement of the grocery code of practice. I understand his wanting to raise the horsemeat scandal whenever he can, but does he really believe that these amendments—especially amendment 34, which would require the adjudicator to report on issues of food safety, food hygiene and food authenticity—fall within the code of practice? He is proposing to extend dramatically the power of the adjudicator and the role of this legislation way beyond anything that the Competition Commission ever envisaged.

[Huw Irranca-Davies]

I thank the right hon. Gentleman for not tempting me to infringe the guidance you have given, Mr Deputy Speaker.

We had a great deal of debate in Committee on the ability of the groceries code adjudicator to comment on several issues concerning the supply chain. In fact, on both sides of the House, several hon. Members said that if the adjudicator were aware of abuses elsewhere they would expect the adjudicator to inform the relevant authorities. I shall be interested in the Government’s response to the amendment, but I would have thought that there was almost an obligation on the adjudicator to report any observed abuse in the management of the supply chain. That is what the amendment seeks to achieve. I agree with my hon. Friend the Member for Edinburgh South that amendments 34 and 35 are important, and we are convinced that the adjudicator should have an eye to this function as well as his or her core role on the supply chain.

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[Sir James Paice]

I add my congratulations to everyone involved from the early days, including my hon. Friend the Member for St Ives (Andrew George). The Minister said that it was a great pleasure to find himself in the same Lobby as the hon. Gentleman: for me it was more of a shock. Nevertheless, it was welcome and I am delighted that the Bill will now make progress.

Many people have portrayed the Bill as supermarket knocking or bashing. I hope that it is not seen as that. Supermarkets play a fantastic role. They have brought before the consumer a great range of products that might never otherwise have been available, in a competitive environment. However, there are people within the supermarket structures, as I touched on in an earlier intervention, who are perhaps acting with excessive zeal and, I am quite certain, going outside the terms of the code. I am not at all surprised if people much higher up the management structures are not aware of what is being done lower down by those who want to make their names as competitive buyers. I hope the Bill will be sufficient to ensure that such malpractices are stamped out, because I am sure they are not what most people want to see. As I said earlier, I feel particularly strongly about the fresh produce world, where these problems are most evident.

Finally, there is a long-held cynical view that any legislation that has all-party support is by definition bad. I hope that this proves to be the exception to that rule. There is some justification for that belief about many other pieces of legislation, but I believe the House is right to have approved this one with such a massive majority over and over again, and I look forward to it fulfilling all the hopes that people have of it.