Groceries Code Adjudicator Bill [HL]

Lord Haskel Excerpts

Tuesday 22nd May 2012 Lords Chamber

[Lord Haskel]

My Lords, I thank the Minister for explaining this Bill because, for once, I am able to say that I welcome a government Bill—with some scepticism, I might add. Nevertheless, it is a big day when I can say that. As my experience is not in food, I am hesitant to speak about the food business, especially after someone as experienced as the noble Lord, Lord Plumb. Like him, I am in favour of codes in business because, like him, I think markets need rules.

When I first started in business—many, many years ago—one of my first tasks was to go and sell our new flame-retardant fabric to the contracts department of John Lewis. It has a big business in furnishing theatres, hotels and restaurants. I went to its buying offices in New Cavendish Street, did my presentation and they were quite interested. On the way out there was a sign telling you who to contact if you did not think you had had a square deal. “That is a company I would like to do business with”, I thought, and I did for 30 years. Waitrose is part of John Lewis and I imagine the adjudicator operated there too; so it has been doing this for a long time. I entirely agree with the point in its briefing—a point my noble friend Lord Grantchester made—that the costs should be allocated according to the number of complaints, instead of a flat levy. In this way you reward compliance.

We were a tiny company then dealing with a large one, and the fact that there was a dispute adjudicator encouraged us to bring all our new products to John Lewis. It benefited and so did we. This is why I welcomed the grocery code Labour introduced in 2009. This Bill enforces that code because presumably it needs new powers of enforcement. This is fine but my concern is that if you go too far enforcing a code it ceases to be a shared interest—the noble Lord, Lord Plumb, implied this. It will then deliver more hope than reality. If you have a serious argument and want compensation you want an arbitrator, not just an adjudicator. From what the Minister said, I think the Bill leaves suppliers and supermarkets to get their own compensation from each other unless the Secretary of State intervenes, and that is a big step.

Another difficulty is that modern business can become so complicated, it is hard for an adjudicator to apportion blame. As my noble friend Lord Grantchester explained, there are now numerous intermediaries creating grey areas all along the supply chain who will be outside the code. It is also very difficult to assess competition up and down the value chain. It is easier to assess between firms selling similar products.

As ever, the devil is in the detail. Does the Minister recall the regulation about extended warranties? Everybody thought it was a wonderful idea that the cost should be clearly displayed to the consumer on the shop counter—simple. The arguments that ensued about where the notice should be put, the wording, the print size and the type face were such that a simple idea became ineffective. Looking through this Bill, to me it looks too complicated and could benefit from simplification.

The noble Lord, Lord Razzall, used the word cumbersome, and I think he is probably right. I imagine that the Bill steers clear of arbitrating claims because of the difficulties of establishing costs. Again, there are so many complications: intangible costs, allocating overheads, hidden commissions, intermediaries, grants, hidden marketing and financial costs, and all the other surprises that we learn about through experience. As I said, to be effective it has to be kept simple.

At the end of the day the adjudicator will settle the dispute by interpreting the contract within the code. In practice, that is probably as much as one can expect. The Secretary of State will be very cautious about imposing a financial penalty, because researching all these details and costs makes it difficult and time-consuming to establish a loss. The noble Lord, Lord Plumb, said that this will make for less red tape, but the Minister will be aware of the calls from the Benches behind her for less regulation and freer markets to make British business more efficient and more competitive. With this Bill, their Government are introducing more red tape and a new quango. The noble Earl, Lord Sandwich, mentioned this. What is the Minister’s response to their concerns?

I am less troubled, so I welcome the Bill. Sorting out grievances between retailer and supplier will eventually benefit the consumer. It will also benefit the supplier and their communities. But it has to be kept simple. My scepticism concerns the value of this Bill in assisting to arbitrate financial compensation. At the end of the day, if the matter is serious, that is what most disputing parties seek. This reminds me of the Bill that the Labour Government introduced regarding prompt payment. It did not solve the problem, but it made things better, and there is nothing wrong with that. That is what this Bill will do, and that is why in general I wish it a fair passage.