Groceries Code Adjudicator

Jim Shannon Excerpts

Tuesday 17th November 2015 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Gray; that is very helpful.

It is good to speak in this debate, and I thank the hon. Member for York Outer (Julian Sturdy) for giving us a chance to contribute. This is an issue for us in Northern Ireland, which is why—although my hon. Friend the Member for Upper Bann (David Simpson) is absent just now—we have three Members from Northern Ireland present. My hon. Friend and the hon. Member for South Down (Ms Ritchie) are members of the Environment, Food and Rural Affairs Committee so they have input to this issue as something that concerns them. I declare an interest as I chair the all-party parliamentary group for eggs, pigs and poultry. The APPG may dwell more on the issues of the laws that come from Europe, but one of the issues that came up at our launch just two weeks ago was that of fair prices. Although Members have referred to the dairy industry, many other sectors of agriculture and farming have problems with that as well.

It is nice to see the shadow Minister and the Minister in their places. We have been here together in debates on at least two different subjects—health and defence. We are now debating agriculture and the Groceries Code Adjudicator; the Minister has a wide interest.

Competition is a healthy part of society, contributing to economic growth, ensuring competitive prices and driving innovation, but sometimes the system that ensures competition is broken. Sometimes competition is not working as it should. That is a clear issue for us. With just four retailers taking 85% of the market, it is clear that competition in the groceries sector is not working. Farmers say that they are not getting their prices, they are working long hours and they are the ones getting squeezed. All the evidence indicates that that is the case. To break the domination and get competition working again, action is needed. Today is a welcome opportunity to discuss that potential action, and to ensure that we take action that works and does not have negative unintended consequences.

Recently across the country and across my largely rural constituency of Strangford, we have seen the impact of the abuse of purchasing power by major supermarkets. The major supermarkets are very important as they push out the product matter, but it is also important that they have local people to supply them. Many of those supermarkets claim, “We buy so much of our products locally.” It is okay to buy it locally, but they have to give the producer a fair price. Farmers are on the brink, with some even contemplating suicide—these are hard times—over the position they had been forced into by abusive monopolies. Unfair trading practices are referred to in the background notes. That is one of the issues.

[Ms Ritchie]

My constituency neighbour will know, as I do, that agricultural produce is critical to our local economy. In that vein, does he agree with me, and with the conclusion of the Ulster Farmers Union, that the Groceries Code Adjudicator should have more power to tackle unfair trading practices, particularly in the dairy sector but also in the red meat and vegetable sectors? That would have an impact on his constituency.

[Jim Shannon]

As always, I am pleased to have accepted an intervention. I note the hon. Lady’s wise words, which outline clearly the issues for my constituency and her constituency, in referring to the unfair trading practices.

We have to value the benefits of supermarkets, as I said earlier. The Competition Commission views the country’s supermarkets as delivering

“a good deal for consumers”.

However, the commission did warn about the impact on suppliers if current practices were to continue—that continuing to produce a quality product at a cheaper than cheap price is unsustainable. It said that

“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.”

In the background information sent to us by the National Farmers Union, there are three examples. Just last week on the TV—I think it was early on Tuesday morning last week—there was a clear illustration of this. A farmer, who I think was from Norfolk, was producing parsnips for Morrisons and had been doing so for years, but he was not getting his price and the company was continuously squeezing him. The problem for him was that it had got to a stage where it was unsustainable. Last week a TV programme carried the story. Morrisons had not replied over a six-week period. Ultimately, he was saying, “I cannot continue after years of the product being purchased at low profit.” This had an impact on him, as he had young sons. He needed to ensure that everything for him was beneficial and cost-effective, but it was not. Whether it is Morrisons, the Co-op or Tesco, those issues need to be addressed. Action must be taken. Relevant powers need to be given to the new ombudsman or eventually to a body that takes responsibility for this issue.

The Competition Commission’s proposed ombudsman would enforce compliance with the groceries supply code of practice. Perhaps the Minister will tell us what extra powers the ombudsman will have to bring supermarkets into line and ensure that they do what they should do. We have to strike the right balance between addressing the abuses of purchasing power by monopolies and allowing legitimate businesses to operate with as little Government interference as possible. That is appropriate, given the serious detrimental impact to suppliers. As I have already outlined, the grocery retailers will be prohibited from making retrospective adjustments to terms and conditions of supply, which are issues that have a direct impact on them.

It is my understanding that the Groceries Code Adjudicator would not have to have, or seek to have, any role beyond what is necessary to monitor and enforce the code of practice. However, with the right approach, and with the teeth that Government can give it, we can, as the hon. Member for South Down and others have said, make the change, make farmers more profitable and help them, as they produce a quality product that in many cases leads the world. They need that profit and that money to continue to be producers.