Groceries Code Adjudicator Bill [HL]

Lord Grantchester Excerpts

Tuesday 26th June 2012 Grand Committee

[Viscount Eccles]

Very briefly, I am sure that the noble Lord recognises that in doing this he goes far beyond the recommendations of the Competition Commission. The one thing that the commission did not do was go up the supply chain, as I would call it, but never mind. It declined to do that. The code is between direct suppliers—although I recognise that the Bill includes something about indirect suppliers—and supermarkets. It is based on the supply agreements between the supermarkets and those suppliers. If we go down the road that the noble Lord indicated, we are in for regulatory creep, exactly as the professor predicted.

[Lord Grantchester]

I support my Front Bench colleague at this stage. As at Second Reading, I declare my interests as a dairy farmer in Cheshire and in having been involved in dairy supply-chains both with farmer co-ops and on behalf of the Royal Association of British Dairy Farmers over many years. In support of the comments made in response to the previous amendment of the noble Viscount, Lord Eccles, there is an extremely delicate relationship between a supplier and the supermarket, and it takes quite some managing. It is not necessarily a question of fear. I am often reminded of the words in the Bible that the lion will lie down with the lamb. When I was in with the supermarkets, I always wanted to make sure that I was a lion but I never quite achieved that status. It is an extremely delicate relationship.

The noble Viscount said that the groceries code has been in existence for two years. It is eminently sensible that we complete this legislation to get the adjudicator in place and then, two years after that, have the review that the noble Viscount looked for. That would be an excellent time to review whether the code should be extended further up the supply chain to the suppliers of suppliers: the consolidators and the processors that have that direct relationship. I am sure that we will then find that there are lots of parts that the code does not cover, to which my noble friend from the Front Bench has alluded already. For example, I point to the practice of offsetting invoices from the supermarkets to suppliers and the charges that they think are quite acceptable to deduct from the suppliers. Those lead to long, detailed arguments and a very awkward time between a supplier and the supermarket. I am sure that putting that review on a statutory basis would, in two years’ time, allow Parliament—it would be wider than just the Competition Commission—to be consulted on the reach of the GSCOP code.

[Baroness Wilcox]

The noble Lord, Lord Knight, has brought us an interesting amendment, supported by his colleague, the noble Lord, Lord Grantchester. It is perhaps not fully aligned with the subject of the Bill, which is the creation of a groceries code adjudicator. I reassure noble Lords that the groceries code, contained within the Groceries Supply Code of Practice Order 2010, already has full statutory force and the requirement to incorporate it in their supply agreements is binding upon all large supermarket retailers. There is therefore no need for the Secretary of State to establish it by statutory instrument.

Furthermore, the review of the groceries code is the responsibility of the Office of Fair Trading not the Secretary of State. If the OFT considers that a change in the code or the order is needed, it can advise the Competition Commission accordingly. As the code concerns the remedying of practices that are concerned with competition, it is right that oversight of the code rests with the independent competition authorities, which have the necessary expertise and can make decisions based on objective economic criteria.

The noble Lord, Lord Knight, also asked whether it is right that the Competition Commission can make such orders without recourse to Parliament. Noble Lords who wish to discuss the powers of the competition authorities will have to wait until the Enterprise and Regulatory Reform Bill enters this House. However, the Government consider it entirely appropriate for the Competition Commission to make remedies based on the findings of its investigations.

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[Lord Grantchester]

I rise to propose Amendment 5. Far be it from me to come between my two noble friends on Amendment 4, but I reflect that although there may be very little between them, there is a slight implication for some of the processes in the Bill. I would be interested to hear the Minister’s response to this question.

In proposing Amendment 5, we have approached it from the—

[The Deputy Chairman of Committees (Lord Geddes)]

With great respect to the noble Lord, I think he means that he is speaking to Amendment 5, not proposing it.

[Lord Grantchester]

Sorry, speaking to Amendment 5—moving Amendment 5.

[Lord Geddes]

No, speaking to Amendment 5.

[Lord Grantchester]

I thank the Deputy Chairman for clarifying that. We have approached it in a simple, straightforward way: that this is, in fact, the role of a regulator. As we have argued and discussed on previous amendments, the role of the regulator is a high-profile one at the moment, with a wide range of powers to effect change in the UK groceries market. It is only appropriate that the Secretary of State should consult with both the relevant Select Committees in the other place to reflect the standing that such a person will have in the business and parliamentary world, so that it is fully transparent to the supply chain that this has been well considered.

[Baroness Wilcox]

My Lords, these amendments concern the independence of the adjudicator and, in particular, how this may be safeguarded through the appointment and dismissal processes. I fully agree that the independence of the adjudicator is critically important to the successful operation of the role.

I have just been passed a note for the noble Lords, Lord Browne and Lord Borrie, on the name “adjudicator”, which I thought might be helpful. The term has been chosen because an ombudsman must deal with consumers rather than businesses. That is the answer to that one.

Before addressing the amendments, I first reassure noble Lords that the Bill provides the adjudicator with full operational independence. There is no question of the Secretary of State telling the adjudicator what to do, who to investigate or what the sanctions should be. It is, however, normal practice that public appointments should be made by Ministers, in accordance with the standard rules and procedures on public appointments. In addressing these amendments I intend to draw parallels with other public bodies in the field of competition.

On the amendments of the noble Lord, Lord Browne of Ladyton, the adjudicator will not be a judge and it is therefore not necessary to involve the Judicial Appointments Commission. Similarly, the panel members of the Competition Commission, who might also be considered to have a similar quasi-judicial role in their rulings on appeals from sectoral regulators, are not appointed or recommended by the Judicial Appointments Commission. It is similarly appropriate that the Secretary of State should appoint both the adjudicator and, if there is one, deputy adjudicator, as both are public appointments. In a similar way, the Secretary of State currently appoints both the chair and the chief executive of the Office of Fair Trading. The Office of Fair Trading can, of course, also impose financial penalties.

On dismissal, the Secretary of State may dismiss the adjudicator only if they are satisfied that he or she is unable, unwilling or unfit to perform his or her functions. This is not a judgment that would be made lightly and could be subject to judicial review if made incorrectly. Given these safeguards, I do not consider it necessary to require the Lord Chief Justice’s approval, nor to make specific provision for the circumstances of criminal conviction, which the Secretary of State could, in any case, take into account when judging whether the person was appropriate for the role.

Finally, on the amendment tabled by the noble Lords, Lord Knight of Weymouth and Lord Grantchester, I make two points. First, while the Government support the principle of suitable parliamentary oversight of public servants, they believe that pre-appointment hearings by Select Committees are only for those roles where it is vital that the post’s independence from government or its importance to the public is of the highest importance. It does not seem clear that the adjudicator, though very important to the groceries sector, would fall within this category.

Secondly, even were the post of adjudicator such a post, it is also not general practice for Select Committee oversight to be set out in primary legislation, but rather for it to be decided by the Secretary of State responsible. I hope that that is helpful and, therefore, ask the noble Lord to withdraw his amendment.

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[The Earl of Sandwich]

The noble Baroness, Lady Byford, and others said exactly what I would have. I am an NFU member. I know how much the Government have steered a course in this to accept third parties. I do not know what the noble Lord, Lord Howard, meant by “all and sundry” but it is a rather sinister phrase. It presumably means mischief and none of us wants that. I hope that the Government keep the wording as it stands.

[Lord Grantchester]

Picking up on quite wide-ranging amendments, I think that on this side we are content that included in the drafting of the clause is the fact that third parties can be party to the complainant. That is perhaps the easiest way to put it. Yet we appreciate what has been said and would like the Minister to underline and put on the record that that is indeed the case. On this side, we think that third parties will act as a responsible check and balance to the process in that they will pick up widespread experience of the supply chain, including from other suppliers who may come forward with information. I am sure that they will act as a steadying hand on any vexatious claims that individual suppliers might feel they have under their own individual circumstances. I will also reply to the noble Lord, Lord Howard. Of course, on this side we are very concerned that fair and best practice should be everyday experience for all businesses, whether they supply supermarkets or not.

[Baroness Wilcox]

I thank all noble Lords. We are considering three amendments in this group—two intended to make it easier for the adjudicator to begin investigations and one to make it harder.

I assure noble Lords that the Government are in complete sympathy with the aims of the amendments tabled by my noble friends Lord Razzall and Lord Teverson, and by the noble Lord, Lord Browne. We firmly believe that the adjudicator should be able to consider information from any source when deciding whether to start an investigation, whether or not this is provided by way of complaint. However, it is unnecessary to make explicit provision for the breadth of information that can be considered. I assure noble Lords that in this respect Clause 4 is written broadly and places no limits on who can complain to the adjudicator or what evidence the adjudicator can consider as reasonable grounds for suspicion. My officials have discussed this clause with trade associations and representatives of suppliers, including the National Farmers’ Union and the Food and Drink Federation, and they have raised no concerns over the wording of Clause 4.

The amendment of my noble friend Lord Howard of Rising would return the Bill to the draft that was originally published for pre-legislative scrutiny last year by restricting the sources of information that the adjudicator could consider to information from suppliers and information in the public domain. I remind noble Lords that this issue was considered carefully by the BIS and EFRA Select Committees, both of which explicitly rejected the version of the clause that is now being proposed. They concluded that third parties, including trade associations and whistleblowers, could have a valuable role to play. After discussion with both suppliers and retailers, the Government decided that that was right. Trade associations, for example, may have a better overall picture of practices in a sector, which could reveal systematic breaches of the code. The Government therefore consider that it is right that the adjudicator should be able to consider any relevant information when making decisions to investigate. However, I reassure my noble friend Lord Howard of Rising that we have also introduced Clause 15(10) to enable the Secretary of State to restrict the possible sources, if it turns out that third parties do act irresponsibly.

I say to my noble friends Lady Byford, Lady Randerson and Lord Howard that there is protection in the Bill against malicious complaints, in that costs can be awarded against a complainant who makes a vexatious complaint or one that is wholly without merit. If those answers are seen as good and fair, I will ask the noble Lord, Lord Browne, to withdraw his amendment.