Groceries Code Adjudicator Bill [Lords]

Justin Tomlinson Excerpts

Tuesday 26th February 2013 Commons Chamber

[Justin Tomlinson (North Swindon) (Con)]

On the evidence of what has happened so far, has the current groceries code been well utilised since its introduction?

[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.

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[Philip Davies]

So my hon. Friend does not think that Procter & Gamble is big enough to look after itself. He thinks poor little Procter & Gamble—that poor mite—needs a state adjudicator to intervene on its behalf because it might find itself at the wrong end of an unfair negotiation with a supermarket.

[Justin Tomlinson]

We are on the side of David, not Goliath. It seems eminently sensible that my hon. Friend’s new clauses would focus attention on the genuine David, not on supporting the real Goliath.

[Philip Davies]

I am grateful to my hon. Friend. We were told that that was exactly the purpose of the Bill in the first place. When it was being sold to us, nobody said it would benefit Procter & Gamble. As has been rightly said, if we want the adjudicator’s time freed up to look after the small suppliers, we do not want its time being taken up by these big multinational corporations.

As it happens, I am going to say something that might seem controversial, but to be perfectly honest I do not particularly care. If supermarkets are going around screwing Procter & Gamble into the ground to get the cheapest possible price to pass on to their customers, I say, “Good on them!” Procter & Gamble’s profits will not be massively impacted on by the supermarkets. I want supermarkets to negotiate robustly with big companies in order to get prices down for my constituents. The Labour party is supposed to support the working person—the people on fixed incomes—but the early indications are that its Members will vote to protect Procter & Gamble’s interests over the interests of their constituents. What on earth has the Labour party come to, when it sides with Procter & Gamble?

It is not just Procter & Gamble, however. We have Harvest Energy, Green Energy Fuels, Imperial Tobacco, Arla Foods and Gallaher—the top suppliers to supermarkets. The naive people who think that the adjudicator will not empire build are living in cloud cuckoo land. If they think that the adjudicator will not look into all sorts of things, they obviously have no experience of these matters.

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[Philip Davies]

I am grateful to you, Mr Speaker.

The hon. Member for St Ives (Andrew George) misreads the Bill, but I will come to the point about the recovery of investigation costs when we debate the other groups of amendments. The Bill does not say that those costs have to be recovered in that way; it says that they “may” be recovered. He seems to have huge faith in allowing the adjudicator to do just as it pleases, but I do not want it to do just as it pleases. I want it to follow strict rules that will prevent it from empire building, and that is part of the purpose of my new clauses.

[Justin Tomlinson]

The adjudicator will clearly have finite amounts of time and resources. Surely it would be better for it to focus on the smaller suppliers who do not have the confidence or the resources to take on the supermarkets.

[Philip Davies]

My hon. Friend is absolutely right; that is the purpose of the Bill. The big multinational companies that I have mentioned are the biggest suppliers to the supermarkets, in that they supply the biggest volume of the 40,000 or so products on sale in supermarkets at any given time, and they therefore have the most scope to benefit from the Bill. Why on earth should we wish to enable them to do that? I do not know the answer, and no one has yet argued that Heinz or Nestlé cannot afford to take their contractual disputes to court or explained why we need an adjudicator to act on their behalf. They do not need an adjudicator; they are perfectly big enough and bad enough to look after their own interests without needing an adjudicator to step in, and so are the supermarkets.

When there is an agreement between a huge multinational supermarket such as Asda, which is owned by Wal-Mart, and a huge multinational supplier such as Heinz or Walkers or Nestlé, let them get on with it. If there is then a row about who has broken a particular rule, let them get on and sort it out themselves. Believe you me, Asda needs Heinz products in its stores just as much as Heinz needs Asda to sell its products. It is a perfectly even arrangement between the two; the one could not manage without the other. Let them sort the disputes out between themselves. Why on earth are we legislating to get involved in those disputes? That is completely ridiculous. Members are arguing that the introduction of a groceries code adjudicator will help small suppliers, and supporting new clauses 1 or 2 will give them an opportunity to make it abundantly clear to the House that the Bill is designed to help the smaller suppliers to supermarkets.

I want to explain why I have used the figure of £500 million in new clause 1 and £1 billion in new clause 2, and why—with your permission, Mr Speaker—I shall put new clause 2 to a vote. I have listed some of the suppliers that would be covered by the £1 billion figure in new clause 2. The adjudicator will deal with retailers with a turnover of more than £1 billion. The Bill is effectively saying that other people need protecting from such huge organisations, and that they are too big not to have an unfair advantage in any contract negotiation. The Bill therefore puts in place a kind of backstop. My point is that if a supermarket with a turnover of £1 billion a year is deemed big enough to look after itself without any extra help or support, surely suppliers with a similar turnover are in exactly the same situation. If a supermarket with such a turnover is deemed too big to be trusted to negotiate properly, why would a supplier with a similar turnover need the protection of the adjudicator? Where on earth is the logic in that?

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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.

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[Mr Spencer]

I am grateful to my hon. Friend for his intervention, as it allows me to clarify that that is my exact point. At no point will there be such a negotiation, as this is not a David and Goliath situation. We are talking about two Goliaths, so the adjudicator will have no role. My hon. Friend has made a career of criticising unnecessary legislation and it seems strange that he should now want to introduce an unnecessary clause into a Bill. I hope that he recognises that new clause 2 would not be necessary simply because the adjudicator will not have a role in negotiating between two Goliaths.

[Justin Tomlinson]

Surely the new clause will send a crystal clear message to the adjudicator, when they take on the role, about where they need to focus their efforts.

[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.

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[Huw Irranca-Davies]

I am in no way being critical of speaking at great length. I can extemporise for the nation myself on occasions. I do not criticise the length of time and I am glad that the hon. Gentleman has had the opportunity to expound his arguments. I have no doubt that he and colleagues who spoke in support of his new clauses believe firmly in what he was saying and believe that we should have much more of what he regards as a free market. I am not anti-free market. The hon. Gentleman may not realise it, but I spent six years working in the private sector running leisure centres, theatres and so on. I understand how the free market works. I have worked within it as a manager and as a business person. I am opposed to the approach that says that we can beggar our neighbour or have a race to the bottom.

The hon. Member for Shipley challenged Members to go and explain to their constituents why they would argue against the cheapest possible price. I will not argue that we should have the cheapest price for every product on a supermarket shelf if that means sacrificing much-needed employment protection such as the Gangmasters Licensing Authority or sacrificing the standards in British agriculture of which we are rightly proud, such as animal welfare standards and so on. His argument that we should provide the very cheapest by lowering standards on food safety, food provenance, nutrition or employment rights is the argument that has previously exposed to their detriment multinational companies when they have been caught out for exploitation or low standards. We have only to think back, in a wholly different sector, to some years ago and to Nike in the previous World Cup when the very footballs on the field were being produced in sweatshop conditions in developing countries. Was that to its benefit?

I want to speak to our amendments 34 and 35, which stand in the name of my hon. Friend the Member for Edinburgh South (Ian Murray) and myself. Another illustration, if the House wants a more recent case, is the issue of food provenance and safety. No hon. Member can seriously argue that the commercial pressures along a complex supply chain have had no bearing on the entry of significant levels of adulterated meat. That is where a pure free market ideology will take us, and that is why I stand out firmly against the spirit in which the new clauses were tabled.

[Justin Tomlinson]

The hon. Gentleman is making some excellent points, and I want to support them by gently reminding him that new clause 2 will prevent the adjudicator from supporting those very multinational companies that he seeks to name and shame.

[Huw Irranca-Davies]

The hon. Gentleman has intrigued me. Let us say that a larger operator over the turnover steps forward to the adjudicator with evidence that does not affect it directly but affects a series of smaller suppliers right down the chain. Does he seriously suggest that the adjudicator should not be able to take action on that? I trust the adjudicator to follow the evidence and identify the power relationship if the supply chain is being abused. If the evidence comes from a larger operator, all to the good. I want the adjudicator to step in and take the right action.