Groceries Code Adjudicator Bill [HL]

Lord Howard of Rising Excerpts

Thursday 28th June 2012 Grand Committee

Moved by

[Lord Howard of Rising]

37A: Clause 6, page 2, line 30, at end insert—
“(2) A large retailer, subject to any enforcement measure set out in this section, may appeal against those measures to the Competition Appeals Tribunal.
(3) If the Adjudicator requires information to be published, the large retailer may appeal to the Competition Appeals Tribunal—
(a) prior to any information being published; or(b) following the publication of any information.”

[Lord Howard of Rising]

My Lords, Amendment 37A essentially would give the supermarkets a right to appeal if they felt that there was a miscarriage of justice or that something has not been done correctly. The adjudicator will be policeman, judge and jury. It seems wrong that there is not some form of mechanism whereby someone who feels that they have been wrongly treated should be able to have recourse. I am sure that the adjudicator will be brilliant but people make mistakes and mistakes are made. On the previous occasion when we were in Committee, the noble Lord, Lord Browne, spoke well on the need for things to be fair and to be seen to be fair. This is an extension of that argument.

I also think that the retailers we are talking about are above averagely susceptible to bad reputation. Naming and shaming is very effective and there should be a way in which they can stop that before it happens if there is likely to be a miscarriage of justice. Noble Lords may recall that during the passage of the Financial Services and Markets Act under the Labour Government, the noble Lord, Lord Saatchi, introduced a right of appeal. I am sure that the Conservative Party would not want to change that sort of precedent. In the interests of justice and fairness, I hope that the Minister will give full attention to what I have said. I beg to move.

[Lord Borrie]

My Lords, the noble Lord, Lord Howard of Rising, has made a significant point. He did not specifically mention one aspect of what he is proposing; namely, that in relation to appeals Clause 9(4) already provides for an appeal against the imposition of any financial penalty, which is the most serious penalty that might arise from the adjudicator’s decisions under this Bill.

Whereas the Bill states that the appeal is to the High Court in England and Wales and the Court of Session in Scotland, the noble Lord, Lord Howard of Rising, wants it to be to the Competition Appeal Tribunal. I can see a lot of point in that. After all, the adjudicator’s basis for action is to deal with the excessive risks which are transferred from the retailer to the supplier and the possibility of unexpected costs being shifted from one to the other. Given that those proposals emanated, as we all know, from a report of the Competition Commission, it may be very suitable that any appeal against an adjudicator’s financial penalty should be to the Competition Appeal Tribunal, as the noble Lord is suggesting, rather than the ordinary courts, if I may put it like that—the High Court and the Court of Session.

The Competition Appeal Tribunal has a president who is a High Court judge and specifically experienced in competition matters. The other members of the tribunal are lay members who are appointed because of their knowledge and experience of competition matters. The noble Lord, Lord Howard, has an excellent point but he wants to go further and allow an appeal not only against financial penalties but against any of the other powers of the adjudicator, such as naming and shaming or requiring information et cetera. I do not think, any more than those who devised the Bill think, that there needs to be an appeal on those matters or powers that the adjudicator may exercise.

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[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.

[Lord Howard of Rising]

I thank noble Lords for their support, which is something that I am not really used to but is nevertheless very welcome. The essential difference is between financial penalties and naming and shaming. Those of us who are old enough to remember a certain gentleman referring to his jewellery being cheaper and not quite as good as a Marks and Spencer sandwich will know that that was the end of his business. It was finished. The businesses that we are talking about are very susceptible to reputation. They work on very thin margins and do not need many people to move for those to be affected. I am very grateful to the Minister for agreeing to look at the issue. When she does so, she will need to look at two or three ancillary points as they all tie in together. In the mean time, I beg leave to withdraw the amendment.

Amendment 37A withdrawn.

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[Baroness Byford]

My Lords, I am grateful for this amendment. It gives me a chance to seek clarification yet again. My understanding from the noble Lord, Lord Borrie, was that the adjudicator would go choose between (a), (b) and (c). I did not think that it would be (a) or nothing, (b) or nothing, or (c) or nothing. I hope that as it stands it will be able to look at different ways of coming back to it.

I go back to an earlier contribution that I did not come in on. It keeps being said that there is little evidence. It is not surprising that there has not been much evidence in the past; that is why the Bill is necessary. In the past an individual supplier was the only person who could bring evidence. That individual supplier was known and future trading was very difficult.

Only this morning, I was in conversation with a vegetable supplier whom I happened to meet informally. She was telling me that one of the retailers she supplies had agreed a contract which had gone through, but, because the retailer thought that the circumstances were different, it had asked for a rebate on the contract that had been agreed. Surely that is extremely unacceptable. I hope that the Bill will deal with that. The reason that we have not had evidence is that people would not have come forward as the Bill will enable them to do.

[Lord Howard of Rising]

That is precisely what happened to me. I just said, “That’s fine. We won’t supply you any more”, and they said, “Fine, we will pay the full amount”. It is a commercial transaction between two commercial bodies.

[Baroness Byford]

I accept that, and in some instances it is possible, but sometimes with perishables it is not. If you take the contract away, what do you do with the goods? They are already lost. Although I accept my noble friend’s interjection, I do not agree with it because certain things have no shelf life; they are there or they are gone.

[Lord Howard of Rising]

My instance was strawberries, and I assure my noble friend that they have a very short shelf life.

[Baroness Byford]

Yes, but perhaps my noble friend was in a better position than that supplier; there was clearly a problem there.

I welcome the amendment and am glad that we have a chance to debate it. I hope that when we come to later amendments concerning fines, we will be able to strengthen the provisions. I do not know whether that will make this amendment unnecessary—I seek clarification on that, because I do not know the Minister’s point of view. If we fail later to strengthen the whole section on fines, the amendment will be extremely important.

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Moved by

[Lord Howard of Rising]

56: Clause 11, page 4, line 13, leave out “may” and insert “must”

[Lord Howard of Rising]

The amendment would enable both retailers and suppliers to request advice and get it from the adjudicator. As expressed at the moment, it is voluntary for the adjudicator to give guidance. It would be most unfair to either side if they were not in a position to get advice if they requested it. We all know that there is an existing code, but there may be times when the adjudicator may take a slightly different view; he may interpret something differently. It would be quite extraordinary if the people who were going to be bound by this, and bound by his decisions, are not in a position to be able to ask him how they should go about their business. It is very difficult to abide by the rules if the person making and interpreting those rules is not prepared to say what action should be taken in order to comply with them. This is especially so during the initial period, when there may be differences of opinion. I beg to move.

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[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.

Amendment 56 withdrawn.

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[Viscount Eccles]

My Lords, I will be brief with this one. This is my substitute for the words that I wish to see left out in Clause 8, which are,

“specifying—

(a) what information is to be published;

(b) how it must be published; and

(c) the time by which it must be published”.

I suggested to the Committee that that was too prescriptive, but I quite accept that retailers need to know how the publishing of what has been described as naming and shaming information will take place. It would be much more appropriately included in guidance. That is why I have suggested the addition to the subjects on which the adjudicator must publish guidance and the criteria that the adjudicator—I have to amend my amendment, because I was still fighting for the Office of Fair Trading at the time—

“intends to adopt towards the content and timing of information to be published under section 8(2)”.

I put that in because I am keen to remove as much of what might be called the prescriptive, mandatory or antagonistic features of this Bill as possible, and to try to engender as much co-operation, discussion and agreement as we possibly can.

If we are going, finally, to depart from self-regulation for other forms of regulation at the same time as I am supporting a Government who claim that they are a deregulating Government, we should try to make sure that the very sensible code of practice is applied by agreement and not coercion, if I may come back to that word. This is just another small attempt to get into the Bill words which encourage co-operation rather than depending upon coercion. I beg to move.

[Lord Howard of Rising]

My Lords, my amendment in this group is along the lines of my previous one, such that the adjudicator “must” publish guidance. It seems absolutely inconceivable that he is not compelled to give guidance and to publish it. Imagine him refusing to let retailers know what steps they have to take to comply with his code. Another point here is one of natural justice. The adjudicator is paid by the retailers. The least that he could do is to provide them with the information on how he is going to treat them; after all, they are footing the bill. As I have said before, his interpretation may be different on these things. However, rather than waste the Committee’s time repeating the arguments, I will leave it at that.

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[Lord Knight of Weymouth]

My Lords, I shall speak to Amendments 108 and 112, and to Amendment 121, which refers to Clause 20, because it is related to the same point. For the sake of efficiency I will do it in that way. Indeed, I shall speak in relative support of the amendment of my noble friend Lord Borrie. I am relaxed about whether the wording is “must” or “shall”. I am sure that there are parliamentary draftsmen who have a very strong opinion on the most effective word as long as the meaning remains. For the sake of plain English we need to be clear about what we are doing here in Parliament. I believe that it is the Government’s intention that the adjudicator’s office should be fully funded by the levy on the major retailers and that the taxpayer should not fund it. If that is the Government’s intention they should say so and be clear in the Bill in the same way as they are about other bodies that are funded by levies. That clarity would help everybody and that is what the amendments would do.

Amendment 121 to Clause 20 would remove the option for the Secretary of State to make grants to the adjudicator so that, again, the office would be fully funded by the major retailers. That is all that that amendment would do. Amendment 112 would remove the provision for a flat rate levy from the 10 major retailers and replace it with a requirement for the levy to be calculated in proportion to annual turnover. As we have heard, there is a significant difference between the sizes of major retailers whose turnover is more than £1 billion. I think that it would be fairer, certainly initially, for the levy to reflect turnover. It may be that in time the levy would reflect those retailers that occupy the most time for the adjudicator and cause the highest number of substantiated complaints and investigations. However, for now, relative to turnover is a better solution. As I recall I think that that was what the Competition Commission recommended. I look forward to a willing Minister.

[Lord Howard of Rising]

I shall speak to Amendment 110A in this group, which seeks to impose some form of parliamentary discipline on the amounts of money that the adjudicator can charge. In effect, the adjudicator is imposing a tax. That is, he is compulsorily taking money from private organisations to fund his office. It would be unreasonable for such power not to be overseen. There is provision in the Bill for the Secretary of State to do so, but a parliamentary order—we all know that they are, in effect, rubber stamps—would at least give Parliament the benefit of being able to look at what is happening and comment on it. There will then be some form of external discipline over the adjudicator when he decides how much money—some call it a levy but I call it a tax—the retailers should pay.

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Moved by

[Lord Howard of Rising]

118: Clause 19, page 8, line 25, leave out “may” and insert “must”

[Lord Howard of Rising]

I will not keep the Committee long as I am mindful of the 7 pm deadline. The idea that the adjudicator might have a surplus is a triumph of hope over experience, rather like divorcing and getting married again. However, if there is a reasonable surplus—there should probably be a minimum above which this does not have to operate—it should be returned to those people who have paid it or, the following year, they should have a corresponding reduction. I beg to move.

[Baroness Wilcox]

My Lords, the Government’s intention in giving the adjudicator discretion over whether to repay retailers at the end of the year is to avoid unnecessary bureaucracy where the adjudicator is required to repay retailers before then immediately raising further funds from them. I believe that noble Lords on all sides of the House are supportive of the adjudicator being able to carry on his or her work with as little bureaucratic burden as possible, especially as in this case the burden would fall on the retailers as well as the adjudicator. I therefore ask the noble Lord to withdraw his amendment, if he feels that this is a good explanation.

[Lord Howard of Rising]

I thank the noble Baroness. I suggest that if there is a large surplus, it should be deducted from the following year. That would save the bureaucracy. I beg leave to withdraw the amendment.

Amendment 118 withdrawn

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[Baroness Wilcox]

My Lords, this is the first time that I have had occasion to respond to the noble Lord, Lord True. I know the noble Lord to be an elegant wordsmith with a passion for our beautiful language, so I would not, therefore, take lightly anything that he has said, even if he feels that he has had to be a little briefer than he would have wished.

Regarding the points that the noble Lord has raised, they are both interesting and technical. They are points on which I will seek legal advice, and I will make sure that when I return he is a happier person than he is today. I am happy to speak to him about this before the next stage of the Bill, and I therefore wonder if he would be prepared to withdraw his amendment.

[Lord Howard of Rising]

Could I just point out to the Minister that this is as much a point of principle as it is of detail? The point of principle should be addressed, and that is not necessarily something that concerns only lawyers, but Members of this House and Members of Parliament in general.

[Lord Knight of Weymouth]

My Lords, my suggestion to the Minister is that it might be helpful for her to write to the Committee, and in particular to address the very valid point that the noble Lord, Lord True, has raised; namely, that Parliament cannot amend these words. I am happy with the words in this Bill, but if this is a pilot, it would be interesting to hear the views of those conducting the pilot as to whether any consideration has been given to us being able to amend those words.

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Moved by

[Lord Howard of Rising]

125: Clause 25, page 10, line 35, at end insert—
“( ) This Act will cease to have effect following the second review period required under section 15, unless a statutory instrument disapplying the provisions of this subsection has been laid before and approved by a resolution of both Houses of Parliament before the end of the second review period.”

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[Lord Howard of Rising]

My Lords, I speak to this amendment, which introduces a sunset clause. This should please the Minister, as it is in line with government policy both to have sunset clauses in new legislation and to get rid of quangos. Two for the price of one, as a supermarket might put it. A sunset clause is necessary because during our debate I found myself, as a businessman, a supplier to supermarkets and a farmer, drawing different conclusions from those expressed by other noble Lords. My noble friend Lord Eccles has already commented on some of the examples quoted by the noble Lord, Lord Knight, in his robust defence of the necessity of having an adjudicator. Putting aside the fact that most of the examples were provided by pressure groups—which brings to mind the famous phrase, “They would say that, wouldn’t they?”— I would like to touch on the tales of woe about the cavalier treatment of new product development by supermarkets, quoted by the noble Lord. I do not believe that they stand up.

If a product is unfairly rejected by a supermarket, and it is a good or profitable product, it will be saleable to another supermarket. In fact, it will probably be grabbed with alacrity. If the product is not good enough to be sold to any other supermarkets, the promoter of the new product has made a bad commercial judgment. It is not the business of government to provide underwriting for commerce.

Supermarkets are always competing to provide something new and better. This is self-evident. As was said on a number of occasions at Second Reading, in the past 30 years there has been an explosion of foods available at supermarkets, without a corresponding increase in prices. That can have been achieved only by retailers constantly looking for new and innovative products. Supermarkets are constantly looking for good new products and these will find a market, if not with one supermarket, then with another. I believe—I speak as someone directly connected with supermarket supply—that this new quango will be expensive and will contribute absolutely nothing except increased costs to shoppers, who will be the ultimate payers of those costs. It is only sensible to have a finite date—which, after all, can be extended if I am proved wrong and the quango does end up making a contribution to food retailing.

[Baroness Wilcox]

My Lords, the Government in general support the use of sunset clauses to avoid the risk of overregulation and to ensure that regulators remain in place only where they are strictly needed. However, the Bill already contains provision for sunset and review, in that the adjudicator must be reviewed every three years and can, following such a review, be abolished if the Secretary of State considers it appropriate. Many noble Lords have expressed their desire to ensure that any power of the Secretary of State to amend the adjudicator’s powers or functions should be subject to proper scrutiny, and the Government believe that the Bill provides for that. To remove the same scrutiny for the cessation of the Act would therefore be disproportionate.

The Bill is fully in line with the Government’s broader policy on sunset and review. Therefore, I think that the job is done and I ask the noble Lord to withdraw his amendment.

[Lord Howard of Rising]

I thoroughly disagree, but I withdraw the amendment.

Amendment 125 withdrawn.