Lord Browne of Ladyton
Main Page: Lord Browne of Ladyton (Labour - Life peer)Groceries Code Adjudicator Bill [HL]
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Baroness Byford
My Lords, I must admit that when reading through the Bill very carefully, I am somewhat sympathetic to the proposal to have some form of appeal apart from that in Clause 9(4), which the noble Lord, Lord Borrie, just mentioned, where an appeal can be made directly to the High Court. I am grateful to my noble friend for tabling this amendment. I also share the concerns of the noble Lord, Lord Borrie, that it should not affect anything other than the severest penalty of fines. Mischief could be had by way of delay. I have followed proceedings on the Bill all the way through, and when amendments arise I will try to make sure that the issues are dealt with as quickly as possible. I wonder whether it might be helpful—it probably is not—if the provision were added before or after Clause 9(4) rather than in the place suggested by my noble friend Lord Howard of Rising. That might be a better place for it, if the Minister is inclined at all to be sympathetic to the idea. It is reasonable that retailers who are taken to court or held up on grounds of not adhering to the code should be able to appeal in some way. I am no lawyer but I would support having a lesser approach. However, the other one will still be there as well. I do not know how the Minister will respond to that.
Lord Browne of Ladyton
My Lords, I support the amendment in part. The complexity of the legislation is such that it takes a bit of figuring out to work out exactly what effect it will have on the regime that will otherwise persist. If I understand the ambition of the noble Lord, Lord Howard, it is to introduce a right of appeal on the part of a retailer in respect of any of the enforcement consequences and that those appeals should all be to the Competition Appeal Tribunal.
In the current structure of the Bill that seems to be unnecessary because there is no enforcement mechanism in respect of recommendations. The matter of whether or not recommendations are accepted is entirely for the retailer. The recommendation is made, which the retailer either accepts or does not, and there is no enforcement mechanism. We will come to my discontent with that structure in a later amendment today, I hope. There is no necessity for an appeal against a recommendation because the retailer is effectively its own appellate body in respect of a recommendation. Retailers can ignore it, and appear to be able to do so without consequence.
On the “naming and shaming”, which is the operative phrase used for the second of the enforcement mechanisms, I agree with the noble Lord that in commercial and reputational terms that could be much more significant for the retailer than a fine. If we get to fines in this structure, I expect that they will be substantial, otherwise they would be pointless. Naming and shaming could be significantly damaging to the reputation of a business built up over decades. I know that witnesses who have given evidence to the BIS Select Committee and been party to the discussions on these matters in the consultation period which has informed our deliberations have differing views on how retailers will respond to naming and shaming and whether it matters to them. I think that an argument can be made that it is a significant penalty and that, in fairness, there ought to be an opportunity for the retailer to have that decision reviewed or appealed in some way before it is implemented.
I note with some interest that the amendment moved by the noble Lord, Lord Howard, creates a right of appeal even after the penalty has been imposed. I can see the merit in that, but it seems to me that if we accept that there ought to be an appeal then we ought to stay the execution until the appeal takes places. There is no point in pardoning an already executed prisoner. That would be a pointless exercise in many ways apart from—well, I do not want to take the analogy too far.
To that extent I support the argument of the noble Lord, Lord Howard, and his amendment—so I support it in part. That may, in my experience of this Committee today, be the kiss of death to the proposed amendment, no matter how sensible or fair it is. The noble Lord has the advantage, of course, of the partial support of the noble Lord, Lord Borrie. That might persuade the Government that there is sense in the amendment, as that seems to be the touchstone in determining whether there will be a positive response from the Treasury Benches. However, the question—and I think it does a service to our consideration—feeds into our later deliberations on the issue of fines. I would just say in passing to the noble Viscount, Lord Eccles, that I agree with much of what he said. Although I do not agree with the reasons why he is making the arguments, I will try to explain later why I agree with much of what he said and why I think that it was really important. There is a fundamental systemic misconstruction in relation to fines in the middle of the Bill which we need to address.
The Committee’s deliberations so far are getting to the heart of the issue of the workability of this regime. I suggest, with respect, that it is incumbent on the Minister to explain why there is this differentiation in approach. Why are there three methods of enforcement? One of the methods is not enforcement at all but is simply a suggestion which can be accepted by the retailer. One is a fairly draconian consequence for a substantial business which will probably operate in all of our communities, and have a replication in all of our communities, but a consequence in which there is no system of appeal at all. The third method, and I will come to it in more detail later, either should be in the Bill or it should not be in the Bill—but it should not be halfway in—and that is financial penalties.
I would say, finally, that I am grateful to the noble Lord, Lord Howard, as I am also to my noble friend Lord Borrie, for their comments on expansion of the Competition Appeal Tribunal. I will need to go away and research the issue. When I first read the Bill I thought that adding to the workload of the already overworked High Court in England, Wales and Northern Ireland and the Court of Session in Scotland may not be a wise thing to do. It almost certainly will be an inordinately expensive process. There will have to be at least five or six wigs on each side of this argument when it gets to that level of debate. If this can be done much more efficiently through the Competition Appeal Tribunal and in a less litigious way then I would support it. However, I will go away and think about that. I suspect that we will have an opportunity at a later stage to deliberate on that, and I may find myself falling in foursquare behind the idea of an appeal to a Competition Appeal Tribunal as opposed to otherwise overworked courts.
Viscount Eccles
My Lords, I have an amendment in this group. Before I speak to it, however, I should like to say briefly that anything that would lower the cost of settling disputes is to be welcomed. The High Court is not to be welcomed in that regard. After all, the intention behind the code of practice was, and is, to provide a method for settling disputes that does not involve the courts or a tribunal at all. As I say, I still hope to find that the Committee can be persuaded that that is the best way of settling disputes.
My amendments go to the naming-and-shaming part of the enforcement by seeking to leave out specifying what information is to be published, how it must be published and the time by which it must be published. I have a later amendment that is a substitution because I would like the criteria that are to be used to cover the matter of publication to be in the guidance under Clause 12. I am on board with the adjudicator being in some form of sensible dialogue with the supermarket about what the information should be and how and when it should be published. However, Clause 8(2) is far too prescriptive and will lead to endless arguments. When we come to the matter of appeals, we have to remember that we do not actually have to write someone having a right to appeal into an Act of Parliament; there is nothing to stop them going to court if they want to do so and think they have a good case. I suggest to the Committee that we should be careful about making the Bill so adversarial, instead of looking for sensible and fair dealing and agreement.
Lord Browne of Ladyton
I agree with the noble Viscount that in the current environment it is impossible to stop people going to court. They will find a way to get to court, and that way will probably be judicial review. If one has sufficient resources behind one—we are talking here about the 10 biggest retailers in the country, and no one apart from the Government has resources that can match them—and feels strongly enough about an issue, one is entitled to find a way to get to court. The problem is that if Parliament does not allow a right of appeal then it will probably have to go by some form of judicial review. What is unsatisfactory about judicial review is that it deals with the process more than it deals with the content, although the content quite often enforces the process. Invariably, one then has to start again. Instead of concluding the matter, therefore, that may just cause it to start again at even greater expense. While the noble Viscount recognises that we cannot stop people going to court, I suggest that it is better if we can provide a sensible and efficient method of reviewing decisions that people who are aggrieved can take advantage of.
Viscount Eccles
My Lords, I completely agree. I am not trying to be prescriptive at all. All that I am saying is that if people feel that they are being unjustly dealt with and they have the resources, they will find some way of challenging what they think is that unjustifiable behaviour. We are debating this matter against the background that no one has yet been able to say what sort of behaviour by the supermarkets they want to see investigated by the adjudicator. If we knew that, we would be in a better position to decide how severe the enforcement procedures should be.
Baroness Wilcox
My Lords, much of the debate about sanctions today has focused on financial penalties. However, I value the opportunity to discuss the rationale behind the other enforcement powers available to the adjudicator. The noble Lord, Lord Howard of Rising, has brought forward two amendments which would together extend the right to a full merits appeal so that it applied to all the enforcement methods and would be to the Competition Appeal Tribunal. The Bill already provides for a full merits appeal to the court against financial penalties, if these are introduced. In the case of recommendations or the requirement to publish information, the Government believe that judicial review is more appropriate.
In the case of recommendations, it must be emphasised that these are non-binding on retailers. There is no consequence which follows if the retailer does not comply, other than the possibility of a further investigation, which could lead to the imposition of a further sanction only if a further breach of the code were found. We therefore believe that, in this case, a full merits appeal would be clearly inappropriate.
The Government acknowledge that for the requirement to publish information the arguments are more finely balanced. However, having considered this in depth, we believe that judicial review remains the most appropriate form of appeal. The reasons for this were set out in the Government’s response to the BIS Select Committee’s report. They include the independence and impartiality of the adjudicator and the breadth of matters that an investigation is likely to consider. The critical difference between the requirement to publish and a financial penalty is that in the latter case there is a very direct and immediate consequence for the retailer, whereas a publication of information is rather different. It should be remembered here that this information will not in itself determine that a retailer has any obligation to a particular supplier. The supplier would still need to bring his case to arbitration to seek damages or any other remedy.
Finally, we have also taken into account the implications that a full right of appeal against a mere requirement to publish could have for the effectiveness of the adjudicator. A full right of appeal, requiring the repetition of a detailed fact-finding exercise, could seriously delay the requirement to publish and so substantially diminish its impact. Taking these matters into account, the Government consider that a full right of appeal is needed only against financial penalties and that otherwise the possibility of judicial review by the court will be sufficient.
In addition, the noble Lord seeks to replace the principle of appeal to, or review by, the High Court or Court of Session with appeal to, or review by, the Competition Appeal Tribunal. While the adjudicator is being introduced on competition grounds, the details of the practices addressed by the groceries code are not the same as anti-trust cases or the other issues dealt with by the Competition Appeal Tribunal. The High Court or Court of Session in Scotland is therefore an appropriate place for such appeals to be heard.
However, I have listened to your Lordships today who support what the noble Lord, Lord Howard, has said or want to question this issue further. Therefore, I am willing to consider this point and will invite the noble Lord, Lord Howard, to a meeting, as well as any other noble Lords who spoke, including the noble Lords, Lord Borrie and Lord Browne, the noble Baroness, Lady Byford, and the noble Viscount, Lord Eccles.
I turn to the amendment proposed by the noble Viscount, Lord Eccles. The Bill contains clear requirements for the adjudicator as to what they must specify to the retailer if they require a retailer to publish information. The noble Lord has suggested that these be removed. I believe that it is important that if a retailer is being asked to publish information, it should be told what information it must publish, how the information should be published and the time by which it must be published. Otherwise, the instruction will be unclear or it could leave too much discretion to the retailer concerned. Given that this is a means of enforcement to be used following a breach of the code, I also believe that it is reasonable for the adjudicator to be able to specify what information is to be published, as well as when and where it is to be published.
Accepting this amendment would make the Bill less clear and would weaken one of the adjudicator’s means of enforcement. In asking the noble Lord, Lord Howard, to withdraw his amendment, I repeat my offer to him to meet me and my officials.
Lord Browne of Ladyton
I am grateful to the Minister for giving way; I have no desire to prolong proceedings this afternoon. In anticipating that the noble Lord, Lord Howard of Rising, might accept the invitation to discuss these matters further, I would welcome being a party to those discussions.
Will the Minister ask those advising her to take into account the interaction of Clause 8(3) with the expectation that review will be conducted by way of judicial review? That has the potential to create a multiplicity of actions that are entirely unnecessary. She indicated that there was effectively no enforcement mechanism in relation to naming and shaming. But there is such a mechanism, by way of injunction or specific performance, in Scotland. I can see a judge in the Court of Session in Scotland or in the High Court in England having an application before them and saying, “I cannot go into the merits of this case. They are for another forum”. A judicial review will be raised at the same time and the interaction between the two will have to be worked out by judges in the same courts involving enormous expense all because there is no appeal. That is inevitable.
Baroness Wilcox
I think that I may have an answer for the noble Lord now, but as we will be discussing this further we will come back to it. The requirement to publish needs an enforcement mechanism. We should not oust the rights to judicial review and therefore we need both. That is the answer that I am giving now. We shall take it into consideration with everything else. I want at least to be sure that I am giving an explanation that is clear. In the mean time, I ask my noble friend to withdraw the amendment.
“( ) In the event that a recommendation has not been followed, the Adjudicator may invoke the remaining enforcement measures referred to in section 6.”
Lord Browne of Ladyton
My Lords, the amendment addresses the issue referred to in the ninth report of the BIS Select Committee as “escalation of enforcement”. I am sure that the noble Baroness will be very familiar with that report. The issue is encapsulated with all the arguments in a couple of pages of that report, starting at paragraph 120.
If I have understood the Bill correctly—leaving aside the issue of fines which we will come to in some detail shortly—the Government propose that the adjudicator will have enforcement powers that include making recommendations and what has come to be known as naming and shaming. We have had a discussion about that so I shall not go back over it in any detail. If, however, the retailer involved ignores the enforcement mechanism of recommendations, there is nothing that the adjudicator can do except to bear it in mind for the next time. Or, if a further complaint resurrects that issue, I understand from what I have read that there is a possibility of further investigation and then of going back to the original set of penalties to see if an appropriate one can be imposed, taking into account that on the previous occasion the retailer ignored the lesser penalty which was designed to start the process off.
As with many other aspects of the Bill, I can see why the Government in seeking some form of light-touch regulation—although that phrase is out of fashion at the moment—have built an escalator into the Bill. I fundamentally disagree with this but the Government are seeking Parliament’s permission to do very ill defined things at some time in the future by way of a process that is totally inadequate: for example, by increasing the powers of the adjudicator in relation to fining. They are asking Parliament to give the adjudicator a similar type of power; that is, to be able to escalate their response as the record against an individual retailer builds up. I have proposed this amendment because that is totally unsatisfactory. It is inappropriate to ask Parliament to do that.
The much simpler answer to this is to say that if the adjudicator’s recommendations are ignored, the adjudicator should be able to escalate. They should be able to go back and say, “Well, I gave you a chance but you ignored me, so I’m now going to ratchet the penalty up because your behaviour in ignoring my recommendations has exacerbated the original behaviour”. As the noble Viscount, Lord Eccles, points out, it would be much better if we were doing all this against a body of evidence showing that that was how the retailers were behaving, but we are not. However, all that has been discussed and, it would appear, investigated over the best part of a decade, with recommendations having been made and accepted. There is quite significant support for this process, but if it is to mean anything there has to be some element of common sense about it.
It seems entirely inappropriate to leave the adjudicator in a position where, if their recommendations are ignored, the adjudicator either has to find some method of starting again or has to store that up for a later date, saying, “The next time that you come round, I will take that into account in the penalty that I will impose”. If the adjudicator ratchets up the naming and shaming, we may have to wait until we have these promised discussions about naming and shaming and other enforcement to find out whether the adjudicator will be in any stronger a position on that than on recommendations. Simply put, Clause 7 concerns “enforcement using recommendations”. There is no sanction provided in the event that recommendations are not followed. There needs to be a sanction and this amendment provides it from the Bill itself.
Interestingly enough, that is the Government’s position—or, at least, it was the position articulated by the Government’s Minister to the BIS Select Committee in his evidence. When Ed Davey gave evidence to the BIS Select Committee, he answered the question about this matter by saying that that was the Government’s expectation of the adjudicator. He had subsequently to explain that he was sticking by the mechanism in the Bill, but his intuitive position—the phrase that the Select Committee uses in recording and commentating on his evidence—was that the adjudicator should have the opportunity to escalate. He is right. The Government should be consistent with the intuitive position that their Minister holds and put to us legislation which reflects that, as this amendment would do. I beg to move.
Baroness Wilcox
That cannot be the case, because we have made an arrangement that fines can be imposed, though it will be the Secretary of State who allows that. Yes, if there is a continuing breach—not just a failure to follow a recommendation—obviously that would be the response.
Lord Browne of Ladyton
My Lords, I am extremely grateful to the right reverend Prelate the Bishop of Wakefield, my noble friend Lord Borrie, and the noble Baroness, Lady Byford, for their support. The noble Lord, Lord Borrie, is a very wise and knowledgeable man. At least, today he has displayed that; I am not sure if he was so consistent the other day. I am very grateful for his support, and I must at least be fairly near the right answer on this occasion.
The Minister’s response disappoints but does not surprise me, because there has been a consistent recommendation that the adjudicator should have the power to escalate right throughout all of the consultation process on the Bill. Indeed, the Business, Innovation and Skills Select Committee, at the end of its deliberations, supported escalation. I know that the Government’s position was not to support it.
Let me respond to the Minister in this way, as I am sure we will debate this again: in the first instance, if there is a recommendation, that means the retailer has—in the view of the adjudicator—broken the groceries code. We are starting from the point that the adjudicator is dealing with someone in breach of the code. The powers of enforcement following investigations cannot be imposed unless the adjudicator is satisfied that a large retailer has broken the groceries code.
Of course, failure to follow a recommendation is not evidence that a large retailer is continuing to break the groceries code. There may be any number of reasons why a large retailer may refuse to accept, carry out or respond to, a recommendation. I agree with the Minister in that regard. However, in her argument she said that the Government have granted the adjudicator the power, in those circumstances, to consider as part of the follow-up a yet further investigation, because a refusal to accept a recommendation will in some circumstances imply a continued breach of the code. Those are the only circumstances that I can see in the Bill where the adjudicator can initiate an investigation where he has no reasonable grounds to believe. It is the failure to follow a recommendation that gives him the power to institute the new investigation.
Baroness Wilcox
Before the noble Lord withdraws his amendment, to which he will no doubt return on Report, it might be useful for me to comment. It is possible for a retailer to have breached the code and the adjudicator to decide that a recommendation is enough. The adjudicator will not know for sure whether a failure to follow a recommendation is also a breach of the code. That will need to be further investigated to be fair to the retailer.
Lord Browne of Ladyton
I am very grateful to the noble Baroness who is utterly generous in responding to every point that is made in these debates. It is very helpful in understanding how this complicated system will work. Essentially, this is a plea to make this legislation less complicated. If it is occupying so much of our time in trying to work out what it all means, perhaps it is just too complicated and we are trying to be too clever. I beg leave to withdraw the amendment.
Lord Borrie
My Lords, I am very happy to follow the right reverend Prelate as I agree entirely with everything that he said. He gave useful examples. I attached my name to the amendment tabled by the noble Baroness, Lady Byford, because I was convinced—I think I said something like this at Second Reading—that this provision should be in the Bill rather than there being just a possibility of a statutory instrument being laid at some later stage, with all the delays and question marks that that would involve. It should be in the Bill that there is a possibility of a financial penalty.
The noble Baroness, Lady Randerson, used a word with which I entirely agree, saying that the Government’s approach by not putting the power in the Bill is cumbersome. It is a cumbersome way of going about things. I am so glad that the noble Viscount, Lord Eccles, is here. If I may refer to some of the things he said earlier this afternoon, if this power goes into the Bill, I do not envisage the adjudicator taking a great deal of time thinking about penalties, the amount, and all the rest of it. I use a word most often used in criminal law, which I hope will appeal to my noble friend—deterrence. The possibility of a financial penalty —whether anywhere near that imposed by the Financial Services Authority on the bank yesterday—has a deterrent effect that is extremely important. The adjudicator will not be judged on the amounts of fines that he imposes to prove that he is a good or a useful man in his post—he will be judged as much by the effect of his powers upon the industry.
Lord Browne of Ladyton
My Lords, my understanding of both these amendments is that they are intended to have the same effect. One may be more elegant than the other, but I think that they probably have the same effect, and I support both.
I do not intend to rehearse the arguments that the noble Baroness who moved the amendment made comprehensively. However, there are some other points that are worth making, and points that we have debated already this afternoon which are worth drawing on.
First, the noble Viscount, Lord Eccles, as we began our deliberations this afternoon, encapsulated the problem at the heart of the Bill in relation to penalties. He set out quite fairly the fine as a penalty and enforcement mechanism, and the choices that face the Committee and Parliament in relation to the Bill. Either we have a piece of legislation that includes financial penalties or we do not—or, because of the road that the Government have gone down, we have a piece of legislation that kind of includes financial penalties.
However, the decision on whether these financial penalties will ever become operative lies outwith the control of those who are being asked to legislate—other than that they will, by the interaction of Clause 9, Schedule 3 and, I think, Clause 23, get an opportunity, via a statutory instrument, to have a short debate which will probably be conducted with very few people in the room, in a comparatively short time and with no power to amend. If the Secretary of State comes to the view that the history of the adjudicator’s experience thus far reveals that the operative penalties—the recommendations and the naming and shaming—have proved to be insufficient, these financial penalties can be activated.
That means that, in terms of this Bill, we cannot have any debate on what level of penalty is appropriate, what sort of circumstances would trigger a penalty as opposed to one of the other enforcement mechanisms or whether we would like rules to be made so that violations of the code can be differentiated by their nature and attract different types of penalties. I do not think that that is constitutionally appropriate. Given the nature of the sort of penalty that we must expect, it is not appropriate for Parliament to be denied the opportunity to have such a debate if the penalty is to be meaningful. I say that because this code can be enforced only against the top 10 retailers in the country. These are enormous businesses. If financial penalties are to have any effect on them, they will have to be significant.
However, there is a much more concerning issue about this construction. I am sure that the noble Baroness—or those advising her—may say, or even be able to find, an example of where something similar was done in the past in order to support doing it again—although the example will probably turn out not to have been extraordinarily successful. I am sure that in responding the Minister will say that Parliament has supervision of this to the extent that it allows this mechanism and that it is entirely proportionate—and I am sure that the word “proportionate” will be used regularly in the response. Of course, the mechanism does not give Parliament any role if it disagrees with the Secretary of State’s persisting view that financial penalties are not appropriate.
The Secretary of State holds all the cards now. The Secretary of State is constrained by this to allow financial penalties only if he concludes that the other powers are inadequate. If the Secretary of State does not conclude that, how are they accountable to Parliament? How on earth can Parliament make the Secretary of State accountable in terms of these mechanisms for not triggering this power, other than the inadequate process of Questions or maybe a Question for Short Debate? There is no mechanism whereby Parliament can say, “This is not what we intended. There are egregious breaches of this going on and the Secretary of State is not willing to trigger this power”, and that is inappropriate. There is not even a continuing method for amending this legislation or a clause that can be resurrected in some fashion. There is just no method for making the Secretary of State accountable for a continuing failure to recognise what is going on and to leave a piece of legislation ineffective because a part of it has not been enacted.
Lord Teverson
My Lords, when first I was looking forward to reading the Bill, there were two areas that I felt were of key importance. One was that we managed to expand the number of people who could bring a case to the adjudicator for the adjudicator to judge from then on, and that was well satisfied by the Government and the Minister in our discussions on the previous Committee day. The other area is this one: is this an adjudicator that counts or one that is there merely for form? Yes, there may be a question of reputation, but not all retailers are that concerned about reputation in every sense. This is a powerful tool and we know that the restricted population of these retailers is going to be sensitive to it but, to show that Parliament and the Government are serious in this legislation, there has to be a direct ability on the part of the adjudicator to be able to make fines. It is a measure of whether this is a serious creation of an appointment. It is for that reason that the amendment put forward by my noble friends is important and goes to the heart of making the Bill something that the industry on both sides will pay attention to. On that basis, I hope that the Minister’s response will be positive.
Viscount Eccles
Will the Minister make clear whether the consultation would necessarily include a 12-week period in which anyone who wanted to put in representations could do so? That is ordinary practice for the processing of a statutory instrument.
Lord Browne of Ladyton
It would be helpful to the Committee if the Minister were able to indicate the scale of fines that the Government have in mind if these financial penalties were ever activated. I cannot imagine that we have got this far without the Government having some idea of what the scale of those fines is likely to be. If we do not know, we are significantly disadvantaged in our debates about what this power masks, because it masks quite a lot from what I can see in the schedule.
Viscount Eccles
I fully agree with that. What industry needs is certainty. What it cannot live with is uncertainty. It needs to have as many of the factors that are going to influence what it does and the way it does it as settled as possible. Uncertainty is the enemy of good business.
Lord Teverson
I congratulate the Government on this clause. It is balanced, it puts the costs where they should be and acts as a break on frivolous claims and complaints. I do not understand the argument about it putting up prices, because if that is the case it is because we have an oligopolistic market. The way that markets work is that the price is set not by the cost of fines but by competition in the market and the crossing of supply and demand. If we have competition in that market—that is a big “if” and I will come back to it in a minute—the individual firm takes a hit on the fine, but it cannot put up the price because there is competition in that market. That sector argues very strongly that there is strong competition in that market, so it does not affect price. That is fundamental capitalist economics. If there is a problem, it is because there is insufficient competition in the grocery market. Frankly, if that is the case, the remedy is not here, but is clearly somewhere else altogether—in the Competition Commission or whatever follows it following any legislation this year.
As I said at Second Reading, I am a great advocate of multiple retailers. They have brought a great deal of benefit to this country, although there may be downsides as well. It is clear that if people cause the costs of an investigation, it should take responsibility for them. That is absolutely the right way to do it, and the clause reflects that. If you believe that fines will put up costs, you have to go to something other than fines. What do you go to? I do not think you go back to taxpayers. That is impossible. You would have to go back to an FSA-type system where you have approved people and you disqualify them from being in the grocery trade, but there is no way that that would work. Otherwise, I suppose you put them in jail under the criminal code, and that is clearly utterly inappropriate. I congratulate the Government on the clause. It is absolutely balanced and correct.
Lord Browne of Ladyton
I am pleased to follow the noble Lord, Lord Teverson. I think his answer to the noble Viscount, Lord Eccles, was exactly correct about the interaction of financial penalties and the truth of the noble Viscount’s arguments about the efficiency of competition. We cannot make a decision about these issues based on an entirely arbitrary judgment about what aspects of the finances of this business are relevant to this decision and ignoring the others. The noble Viscount is right about that, but he has to apply that logic to himself. He cannot say that it is all about margins and not about the scale and nature of these businesses and the amount of profit that they earn, because they are relevant to this.
That having been said, this is a very odd clause given other parts of this legislation because, however you dress this up, this is a financial penalty. I asked the noble Baroness a simple question: what scale of financial penalty are the Government prepared to countenance in relation to this legislation? The answer that I got was, “Without the experience of the adjudicator working, we have no idea”. The adjudicator has been given a blank cheque without any experience.
Viscount Eccles
I am listening intently. Will the noble Lord, Lord Browne, deal with the issue of anonymity? If my amendment were accepted, if the adjudicator believed that one retailer had breached the code, I can see that it would still be complicated but not quite as complicated. If the adjudicator has a duty to preserve anonymity, I cannot see how he could do so without widening the investigation in such a way that means it is not easy for people to identify who is being investigated. At that point, the investigation costs go up and the way of presenting them so that they are eventually paid by whatever means becomes much more difficult. How would the noble Lord deal with the dimension of anonymity?
Lord Browne of Ladyton
I do not know if I am grateful to the noble Viscount for asking me that question. If I were standing where the noble Baroness is, then I would feel I had to answer it. The only answer I can give the noble Viscount is that I will think about it. However, I suggest that for the purposes of the Committee, the fact that it is not easy to answer makes the point that he wishes to make.
There are all sorts of complexities about this legislation, many of which are necessary. I believe that anonymity at the heart of this process is necessary to build confidence in it and ensure that people come forward in this unequal bargaining position. The noble Viscount himself said that the consequences of people being exposed may be significant for them as suppliers to the retail industry. However, all of these complexities are going to keep the adjudicator awake at night in any event. This complex structure that we are creating—and we are all now willing participants in this if we do not speak out against it—is taking a reasonably good idea, which could be delivered simply, and complicating it beyond all belief. It is so complicated now, and I have taken such an interest in this over the last couple of weeks, that I might go back into practising in the legal profession, because I can see opportunities here that were not there when I practised before, and niche practices are places to make decent money now in the legal profession.
I do not support the argument that the noble Viscount puts forward, because I think costs should fall. The nature and scale of what we are dealing with here is such that if people cause this draconian step to have to be taken, then they deserve all they get in my view. They should then have to go out and compete in the market in order to make that money up in some other way.
There is another point about this clause that disturbs me, which is the part that the noble Lord, Lord Teverson, likes and is designed to avoid vexatious complaints. This is entirely the wrong way to go about this. We should be saying that the adjudicator should stop vexatious complaints and not pursue them. I cannot believe that we will be satisfied if we appoint somebody to be the adjudicator who has to resort, after an investigation, to imposing the costs of the investigation on to a vexatious complainer. I want an adjudicator who says, “I have looked at this, it is vexatious and I am not doing it”.
Lord Teverson
I am not going to present the Minister’s case, but it seems that the whole way that the early part of the legislation is written, which we dealt with in the previous sitting, was that the adjudicator is under no obligation to pursue anything that he or she feels is vexatious. That is inherent in the Bill, hence you then move on to this. I take the noble Lord’s point.
Lord Browne of Ladyton
I am grateful to the noble Lord and I think he has got my point. It seems to me that we ought to front-load the assessment of vexatiousness and not leave this bit at the end, as if somehow it balances everything and makes it appear much better than it is. We should give the adjudicator the power to say to people who bring complaints that are vexatious or without merit—and that will be revealed very quickly—“I am not taking these any further and that’s it”. People have to have confidence in this. The decisions that we want the adjudicator to make in relation to this issue will be decisions of moment and will have to be serious and important points. We do not want an adjudicator running around doing lots of small investigations. We want one or two key investigations that go to the heart of the inequities in this market, which people want the Government and Parliament to address. The previous Government started to do that. I am uncomfortable with this particular clause for a number of reasons but am grateful to it because it exposes the false logic of a lot of the rest of the provisions of this Bill.
Baroness Wilcox
My Lords, I understand my noble friend Lord Eccles’s reluctance to see individual retailers or complainants having to pay the costs of investigations. However, I think this is justified in both cases and take this opportunity to explain why this clause should stand part of the Bill.
In the case of retailers, they can be required to pay the costs of investigations only if the adjudicator is satisfied that they have broken the code. In this situation, the need for investigation and enforcement follows from their actions. It would seem unfair on retailers who have not breached the code to incur additional costs through a general levy when there is a party who clearly bears responsibility for the costs being incurred. I know from our debate at Second Reading that many noble Lords feel strongly that the costs should fall on those who breach the code rather than those who do not, wherever possible.
This is not a financial penalty or a blank cheque; it simply ensures that if a retailer breaches the code, the cost of the investigation can be borne by them, not by the other nine retailers. In the case of costs being borne by complainants, the Bill is clear that they can be expected to pay the costs of an investigation only if the adjudicator is satisfied that their complaint was vexatious or wholly without merit. That is a strong test directed at clearly irresponsible complainants rather than simply erroneous or weak ones. Without such a power, individuals might be motivated to make complaints that they know to be false or completely unjustified, wasting the adjudicator’s resources and placing unfair burdens on the retailers it investigates. Of course, the adjudicator should not pursue a case that he or she knows to be vexatious, but that may not be clear at the outset. That is simply a safeguard in case an investigation turns out to have been based on vexatious complaints.
Finally, I note that in each case, the clause says that the adjudicator may require a party to pay the costs of investigation. That is strictly discretionary. For instance, if a breach was found in a retailer but it was understood to be a matter of simple error, the adjudicator might decide that it would be disproportionate to require it to pay all of the costs. I hope that helps the noble Lord, and I support the Question that the clause stand part of the Bill.
Lord Browne of Ladyton
My Lords, I shall speak to Amendment 57 in this group, standing in my name. A number of references have been made to the importance of the adjudicator as the driver of a changed culture. I have heard the adjudicator’s role referred to as a role which the Government hope will develop into a role operated by the person in the country who knows the code best. Clearly, that person and that office is the place that people should be able to look to for advice and guidance, because it will be the repository of the best advice and guidance about the code.
Consequently, I support the amendment of the noble Lord, Lord Howard of Rising, that the adjudicator should be required to give advice to those people. As the Minister said, the expectation is that a culture of changed practice will be created rather than a culture of litigation. If the adjudicator is required to provide the advice, that is an element of changing the culture. As I have already said, at Second Reading the Minister referred early on to the fact that anybody can make a complaint to the adjudicator. In winding up the debate—it is Column 764, for the purpose of the Official Report—she made reference to the importance of the public and to their desire for this area of commerce to operate in a way that addressed their expectations but which was also fair.
The public therefore have a role to play in this. They can make a complaint; they are consumers of the whole objective of improving the competition of this part of the economy. However, they are excluded from the list of people to whom the adjudicator can give advice. It seems contradictory to encourage anybody, including any member of the public, to make a complaint but not give the adjudicator the statutory power to give advice to the public. I have amended this, therefore, to include the public in the list of bodies. The noble Baroness is right that the public will want to know and understand how this code operates. Without the vires or the powers, the adjudicator will not be able to give them advice. The adjudicator ought to be able to do it.
Baroness Wilcox
My Lords, providing advice and guidance will be important in the adjudicator’s role of promoting compliance with the groceries code. I understand, therefore, why my noble friend Lord Howard of Rising wishes to see a requirement on the adjudicator to provide advice and why the noble Lord, Lord Browne of Ladyton, wishes such advice to be available to the public as well as to retailers and suppliers. I agree with the noble Lord, so it is important that the adjudicator clarifies certain issues around how he or she will work and indeed, how the public as well as suppliers and retailers will have an interest in this.
However, under Clause 12 the adjudicator has a duty to provide guidance on how he or she will investigate and has powers to provide further guidance on any issue related to the code. This guidance will be published and available to all. It is therefore the most suitable format for any obligatory communication by the adjudicator and is the best way for the adjudicator to deal with the public. Conversely, advice is more likely to be given on an individual basis to clarify specific issues with retailers and suppliers. It is likely to be given where the adjudicator notices that certain retailers or suppliers do not have a clear understanding of the code. It is also likely to be given to retailers or suppliers who are not sure whether a specific practice that is relevant to them is within the code. Advice is therefore suited to individual, potentially technical discussions of the code with those to whom the code is more directly relevant—suppliers and retailers. Any statements of general principles can be made through the power in Clause 12 to provide guidance, and those statements will be available to the public.
On whether the provision of advice should be mandatory, the adjudicator would normally be expected to provide advice when it is requested. However, the adjudicator will have a limited budget and will need to prioritise their work accordingly. It is therefore appropriate that they should have the freedom to choose whether in a particular instance giving advice is the best way of encouraging retailers to comply with the code. There could also be circumstances when giving advice would be inappropriate; for example, due to a conflict of interest. I ask noble Lords not to press their amendments.
Lord Browne of Ladyton
Perhaps I may ask the Minister a relatively simple question. If a member of the public thinks that he or she is in possession of knowledge that should support a complaint to the adjudicator, are they entitled to phone the adjudicator’s office and ask for advice as to whether that is appropriate? If not, is it common sense?
Baroness Wilcox
I do not imagine that the adjudicator will put up a barrier to people telephoning and asking questions. I imagine that they will have with them a group of people who will be able to assist anyone who comes. Looking at the adjudicator’s incidental powers, they may do anything that is calculated to facilitate the carrying-out of their functions, or is conducive or incidental to it. It is not for Ministers to interfere at this stage with how the adjudicator decides to work. I think that that covers the noble Lord’s question.
Lord Browne of Ladyton
It does indeed, and I am very grateful to the Minister for her immediate response, but she may want to compare that response with the one that she gave to my attempt to add the public to those who can get advice. It seems that the answer now is not that there are two types of communication, one appropriate to retailers or suppliers and another, which we are supposed to find in Clause 12, appropriate to the public. The answer is actually that the way in which the Bill has been drafted allows the adjudicator to give advice to the public if he or she wishes to do so. It would therefore appear that my amendment is unnecessary and that all the other responses I have just received, suggesting that it was inappropriate, are not correct.
Lord Howard of Rising
I thank the Minister for her reply, but there remains an essential difference. Under Clause 12, the adjudicator chooses what he will give guidance on. Should there be a point on which he has not given guidance and on which either the retailer or the supplier would like guidance, it would be completely contrary to any form of natural justice if they could not get it. If the guidance under Clause 12 is so absolutely brilliant, nobody is going to ask him for it under Clause 11. Should he make a mistake or omit something which he should have included, he has to be made to give an answer. That is the fundamental point.
The noble Baroness said that you have got to look at the costs of all these things. As it stands, the adjudicator has an unlimited budget. I will return to this later in our deliberations on the Bill, but I have seen no cap. The adjudicator can turn around and say to the supermarkets, “Let’s have a bit more, mate”. I beg leave to withdraw the amendment, but I will come back to it later.
Lord Browne of Ladyton
My Lords, I do not think I shall detain the Committee for very long. I am hopeful that the Minister will have a simple answer to this particular problem.
The amendments are designed to do two things: they would extend the obligation of confidentiality beyond the adjudicator to his or her deputy and staff, and would provide a criminal sanction for a breach of the obligation of confidentiality. The arguments are comparatively simple. Clause 18, on a straightforward reading, limits the obligation of confidentiality to the adjudicator. If that reading is correct then this is far too narrow. The persons connected to the adjudicator should also be covered by the statutory provision, and these include, at the very least, the deputy adjudicator and the adjudicator’s staff.
The obligation of confidentiality in Clause 18, with the wording that has been adopted, can be argued to be discretionary rather than mandatory, and the amendment deleting the word “may” and inserting the word “must” clarifies that the obligation is mandatory. Amendments 102 and 103 are consequential amendments on those two provisions.
The obligation provided by Clause 18 must be enforceable, and in my view the provision of a statutory offence will ensure that the obligation is respected. I beg to move.
Baroness Wilcox
My Lords, the duty of the adjudicator to keep complainants’ identities confidential is central to this Bill. The initial market investigation, consultation and pre-legislative scrutiny all indicated that suppliers would be reluctant to complain if they thought that they would be identified, and noble Lords have made the same point in the House. The protection of the identity of parties to arbitration is likewise important. The proposed amendments on confidentiality therefore need careful consideration.
The noble Lord, Lord Browne of Ladyton, proposed a number of amendments with the clear aim of making the requirement on the adjudicator to maintain confidentiality as tough as possible. I agree that this needs to be a strong requirement. However, I believe that the Bill already achieves this.
Two of the amendments in the name of the noble Lord, Lord Browne of Ladyton, specify that the adjudicator “must not” rather than “may not” make unauthorised disclosures of information that might break confidentiality. I am confident that “may not” and “must not” have the same force here. The words “may not” are intended to be prohibitive: the adjudicator is in either instance required to refrain from making unauthorised disclosures.
Another two amendments in the name of the noble Lord, Lord Browne, specify that the duty to maintain confidentiality also applies to the deputy adjudicator and any staff. I agree completely with this as a matter of principle. However, the Government are confident that the deputy adjudicator and staff seconded to the adjudicator would already be bound by the duty of confidentiality as set out in the Bill and that therefore the amendment is unnecessary.
The noble Lord’s final amendment on this clause makes any knowing breach of confidentiality by the adjudicator or his or her staff an offence and introduces fines for anyone found guilty of such an offence. I do not believe that the threat of fines is necessary to make the adjudicator act responsibly. The adjudicator will be a public authority and will be bound to take the responsibilities under Clause 18 very seriously, as well as being bound to respect the human rights to privacy of the relevant parties. It is true that there is no sanction for breach expressed in Clause 18 but a breach would be a breach of statutory duty by the adjudicator and would in principle enable a person who suffered from a breach to claim damages from the adjudicator or to seek an injunction to prevent the disclosure if the person knew in advance.
I do not think that my noble friend Lord Eccles will be speaking to his amendments.
Baroness Wilcox
I therefore would ask the noble Lord, Lord Browne, to withdraw his amendment.
Lord Browne of Ladyton
My Lords, I am reassured by the noble Baroness’s comprehensive response, and now that her words are on the record, it will be very clear that the requirement of confidentiality applies not just to the adjudicator, as the Bill states, but to the deputy adjudicator and the staff. In making a plea for plain English, which is where we started our debate, I wonder why we do not just say what we mean in legislation, in order that we do not have to read Hansard to find out that it applies to other people. A few words here would not cost us that much. If “may not” can have as strong a construction as “must not” and the Government prefer “may not” when they mean “must not”, I am content with that as well. However, I still think that it would be better if we said what we meant rather than left it to what lawyers understand of these things.
I am impressed by the Minister’s confidence that in future this confidentiality will be respected. I have had the privilege to hold some quite significant offices in government and I have discovered, sometimes to my frustration, that where one expects confidentiality most is where one least gets it. We have a media industry that substantially operates on the basis of leaks. These stories will be of interest to many people. They will sustain the front pages of newspapers that are competing with an internet that is utterly uncontrollable. I would not be surprised if very quickly we find that trying to stem leaks out of these investigations is a problem, and I believe that we will regret that we did not put down a criminal offence to discourage that. In the current circumstances, though, and at this time of day, I do not intend to insist on this any further. I beg leave to withdraw the amendment.
Lord De Mauley
I hate to intervene on my noble friend. Perhaps it would be going too far to suggest that he is verging on a Second Reading speech, which I would not want to do that. I happen to know that my noble friend has some quite comforting words to give that might enable him to abbreviate his speech on this clause stand part debate.
Lord Browne of Ladyton
Perhaps the noble Lord will allow me to interrupt him, the comfort is to be found if he simply looks at it. The heading applies to Clauses 19 and 20, so the funding that comes from the public purse and the Secretary of State is encompassed under this heading. This is how the adjudicator is to be funded.
Lord True
My Lords, I hear what my noble friend says, and I am conscious that everybody needs to go. It is a great pity when a Member wishes to raise a point of substance on the way in which law is written—something that this House is here to deal with—he is very swiftly interrupted by a member of his Front Bench. I will try to accelerate my remarks, having been patient in this Committee.
I hear what the noble Lord, Lord Browne, says, but to answer his point, let us look at the heading on page 5, line 21:
“How is the Adjudicator supervised?”.
That smothers in obscurity the power to abolish the adjudicator in Clause 16. Only Clause 15 is about supervision, yet this Committee has been concerned about abolition. What value judgment is this, when the Bill highlights supervision and passes over abolition?
Above Clause 21, the heading reads:
“Will this law mean other changes to the law?”,
which I will now speak to. This is a nonsense, because when the Bill is commenced what is in Clause 21 will already be law, so that will just lie on the Bill as an otiose and rather foolish idea.
Finally, I will give one more example before I accept the strictures and sit down. However, I will, having been made to sit down, return to this matter on Report, and I will also listen very carefully to what my noble friend says. This matter is intended to help electronic access to legislation. If you look at the heading,
“How does the Adjudicator handle information?”,
the normal practice is that when you click on a heading on an electronic screen, the screen shows text starting from the point of the heading. Why, then, does this heading come above Clause 18 and not above Clause 17, which covers the Secretary of State’s right to require information from the adjudicator? Surely, anyone interested in how information is handled should be signposted to that new power for the Executive. Who decided to put the heading there and not above Clause 17, and why can Parliament have no say in the matter?
I will sit down now, but I submit that potentially significant issues are raised by this new practice, and I apologise, after eight and a half hours of proceedings on this, for venturing to speak for eight minutes.