Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)Groceries Code Adjudicator Bill [HL]
Lord Whitty Excerpts
Lord Cameron of Dillington
My Lords, I first declare my interest as a farmer. I put my name to the amendment because it is important that we remain as flexible and light on our feet as possible in changing circumstances in this area. The effectiveness of the groceries code adjudicator is dependent on the effectiveness of the code. Both are equally important. It is surprising that while the adjudicator and his role are continually under review in Clauses 15 and 16, the review of the code is not given such emphasis.
Clause 13 in its simplicity is not sufficient. It sets out what the adjudicator could do but does not give me any confidence that anything will happen. It is important that as the adjudicator gains more experience, and as all the players inevitably try to push the rules to the limit, we should be able to review their roles and the rules involved. Circumstances change. The rules of rugby change from year to year and from time to time. The rules of Parliament relating to MPs’ and Peers’ expenses change. There are always new problems to be dealt with and overcome. We need to ensure that we can overcome the shortcomings in a structural way—hence subsection (2) of the proposed new clause.
The noble Lord, Lord Grantchester, mentioned the problems of the dairy industry. I do not know whether any review of the dairy code in the light of these recent developments would necessitate change, but the matter would certainly be worth looking at. It is vital that the groceries supply code of practice is not set in concrete. The amendment represents the necessary Kango hammer to free it.
Lord Whitty
My Lords, my Amendment 31 is in this group. I apologise to the Minister and the House that I was only a passive presence at Second Reading, and even more passive in Committee, despite my long-standing interest in the subject. I wish the Bill well and I am glad that the Government brought it forward.
I will resist the temptation to give my Second Reading speech now. I will say two things. First, as my noble friend Lord Grantchester said, it is 10 years since I started grappling with this issue and urging the noble Baroness’s predecessors, the competition authorities, to take this seriously. We have had the code since then and this begins to give it serious teeth.
Since I left office as a Minister I have also been a consumer champion. Occasionally I was leant on to say that it was not in the interests of consumers to have a go at the supermarkets by means of the groceries code. Supermarkets have made a very impressive contribution to consumer benefit, in terms of choice, price and convenience. However, it is not in the interests of consumers, even in the medium term, for part of the supply chain to be wiped out, or for supply at the retail end to be restricted in terms of competition if that is done by a large-scale operator. Consumers have benefited from supermarket activity, but they would not benefit from the supermarkets overstretching their ability to control the market.
It is also true, in defence of supermarkets, that it is not only they who could abuse their power in the supply chain and engage in the kind of activity that they are accused of, and which my noble friend and others referred to earlier in our debates on the Bill. As we know with the current situation of milk production, there is a question mark over the behaviour not only of supermarkets but also of large milk processors. My amendment does not seek immediately to broaden the scope of the code but it suggests that, were Amendments 2 and 26 adopted—in other words, were there to be a review—it may well be that it is not just the large retailers that should be included within the code’s provisions. In those circumstances the Minister would not have to wait another 10 years for primary legislation to extend the code and the adjudicator’s powers but, in the light of the reviews required by the other two amendments in this group, would be able by order to extend the provisions of the code to other large operators within the supply chain. That would be beneficial to the small suppliers; it would also give some clarity and restraint to those who were tempted to overuse their monopsonistic or oligopsonistic powers within the food chain. It would be an improvement to this Bill if the possibility of so doing were included in the primary legislation at this stage, rather than have to come back to it in a few years’ time.
Baroness Wilcox
My Lords, I understand that the noble Lord, Lord Grantchester, is eager to see a living code that will be responsive to the adjudicator’s experience of the groceries market. Other noble Lords have said they feel the same way, and I understand those concerns. I would like to discuss the noble Lord’s specific amendments but shall first address the issue of principle at stake here.
The adjudicator should clearly be responsive to needs within the industry, not only by prioritisation but by clarifying the code through advice and guidance. The adjudicator should also be able to use their front-line position to raise issues with the competition authorities, which are responsible for the groceries supply order and the groceries code contained within it.
As the noble Lord, Lord Grantchester, has said, the specifics of the dairy industry are being considered elsewhere in government. The adjudicator is not intended to address every problem in the sector, and the adjudicator’s role is clearly limited to the relationship between retailers and their suppliers under the groceries code.
Nevertheless, proposals in this grouping go beyond this natural evolution of the code’s interpretation, and risk undermining the basis for the code itself. Those involved in ensuring that this Bill reached Parliament—campaigners, Select Committee members or Ministers—have emphasised that the justification for this Bill lies in a rigorous market investigation and a finding by the independent competition authorities. This justification would be severely undermined if changes to the code were made without proper process through the competition authorities.
This principle goes beyond the issue of the groceries market and concerns the competition regime as a whole. It is a fundamental principle of the competition regime that remedying competition problems should be addressed by the independent and expert competition authorities, rather than directly by Ministers or Parliament. Oversight of these remedies is likewise the responsibility of the independent competition authorities.
This was at the core of the reforms introduced by the previous Government in the Enterprise Act 2002, which removed Ministers from competition decisions. As the then Secretary of State said at that Bill’s Second Reading:
“The Bill therefore provides that, in the vast majority of cases, with the exception of national security cases only, decisions will be taken by independent competition authorities, free from political interference”.—[Official Report, Commons, 10/4/02; col. 45.]
This principle is continued in the Government’s further reforms set out in the current Enterprise and Regulatory Reform Bill. Although the competition authorities are rightly accountable to Parliament for their overall performance, this is quite different from Ministers or Parliament debating or overseeing particular remedies.
In the case of the code, this means that responsibility for oversight of the code lies with the Office of Fair Trading under Section 162 of the Enterprise Act, not with the adjudicator, as Amendment 26 would have it, nor with the Secretary of State or Parliament, as Amendment 2 sets out. Equally, it is for the competition authorities to decide whether or not to amend the code—not, as the noble Lord, Lord Whitty proposes, the Secretary of State.
I remind noble Lords that the adjudicator has a statutory duty to make recommendations to the OFT if he or she thinks the code should be changed. This provides a flexible way for issues to be escalated whenever needed and therefore contributes to a truly living code, while respecting the existing structure of the Enterprise Act.
Baroness Wilcox
I hope that I have not been too wordy in my response. It is just that there was a real point of principle here. I felt it was worth going over the ground to make sure I had made it clear that we did not feel that these amendments were relevant at this time. I repeat that responsibility for oversight of the code lies with the Office of Fair Trading under Section 162 of the Enterprise Act, not with the adjudicator, as Amendment 26 would have it, nor with the Secretary of State or Parliament, as Amendment 2 seems to set out. Equally, it is for the competition authorities to decide whether to amend the code, not the Secretary of State, as the noble Lord, Lord Whitty, proposed. I hope that I have clarified the Government’s position.
Lord Whitty
We accept that the primacy of the competition authorities in these amendments could be clearer and that the precise wording may not be appropriate. Can the Minister not agree to take away these amendments and write them in such a way that makes the competition authorities’ role clear while establishing the principle of a review and the fact that that review might recommend an extension of the code? That is a point of substance. I take the point of maintaining the role of the competition authorities but a relatively minor amendment from the Minister at a later stage might help.
Baroness Wilcox
I am always nervous arguing with the noble Lord, Lord Whitty, given his experience as a Minister and the fact that he was head of the National Consumer Council, a role that I also held. I know the breadth of his knowledge on this subject, which is why I took such a long time to give my answer. This is as far as I can go. I hope that when the noble Lord reads in Hansard that the Bill already requires the adjudicator to recommend changes to the OFT, he will see that I have covered most of his worries and that he will withdraw his amendment.
Lord Whitty
“(3) If a trade association or other third party refers a dispute to arbitration, the Adjudicator may—
(a) accept appointment as arbiter;(b) appoint another person to arbitrate;(c) dismiss the dispute referred as trivial or vexatious or providing insufficient prima facie evidence.”
Lord Whitty
My Lords, the amendment goes back to the basic problem about the relations within the food supply chain between the supermarkets and small and medium-sized suppliers and all the attempts to enforce the code and its predecessors without statutory backing. Whether we like it or not, there is an atmosphere of apprehension, anxiety and fear among small suppliers to supermarkets, and a feeling that if they raise problems with the supermarkets under the code, they are in danger of retaliatory action at some later stage—their contracts will be ended, curtailed or put on to a less beneficial basis.
I am aware that this was discussed in Committee and indeed there have been discussions about it since it was first raised, but Clause 2 still appears to allow disputes to be referred to the adjudicator only by the supplier themselves or, alternatively, by the large retailer. My amendment would explicitly allow a case to be referred to the adjudicator by a third party—an appropriate trade association or a farming union—and this would relate to issues that covered more than one supplier, or perhaps only one supplier but where there were general implications of the outcome of that particular case. The amendment would allow third- party initiation by a trade association or farming union but possibly also other third parties that were appropriate—for example, an agricultural charity.
This would not be an open-ended requirement. As with the large retailer, the adjudicator would not have to take the case under this amendment. While Clause 2 requires the adjudicator to take a case from the supplier, although not the large retailer, my amendment would give the adjudicator sufficient grounds for not taking it, on the grounds either of it being trivial or vexatious or because of a lack of prima facie evidence. The argument that this would be used against the supermarkets on spurious grounds by campaigners who were opposed to supermarket activity in unrelated fields would not be a good reason for rejecting the amendment. It would relate to genuine supplier problems but it would protect the supplier, the farmer and the small business from the fear of being retaliated against at a later stage. It would support that supplier if the NFU or trade association took up the case.
I appreciate that the Minister may not like the wording—her officials rarely do—but this must be something on which she could go a little further than she did in Committee to assure us that third parties could take such cases. Only that, I feel, would put an end to the apprehension and the fear among small and not so small suppliers, which are at a serious disadvantage with supermarkets. They would be protected under this code and other legislation. I beg to move.
Lord Browne of Ladyton
My Lords, I will speak to the amendment standing in my name, which seeks to insert a mechanism for ensuring the independence and the qualifications of an arbitrator appointed under the code by reference to the provisions of this Bill. It generates, I would argue, a valuable opportunity for the Minister to explain a very complex part of this legislation, which, without an explanation in the Official Report of our deliberations, I fear may not be understood by those who come to apply, or seek to apply, the provisions of this Bill in relation to the code.
As we have already heard, this is a unique piece of legislation, because the basis of it is a code that is owned by the Competition Commission. If the code is repealed, then all this legislation becomes redundant. I embarked on the amendment of this particular part of the Bill because of my then limited understanding of both the arbitration legislation as it applied in England and Wales and the Arbitration (Scotland) Act 2010, which has been passed by the Scottish Parliament and, in part, now applies to Scotland, but which is not yet fully commenced. I was unsure how all these things interacted, but I was certain that at some stage it would be necessary for the Government to make it perfectly clear that the provisions of that legislation, which were carefully debated and thought through both in this Parliament and the Scottish Parliament, and were designed to generate an independent and properly qualified process of arbitration, would properly be applied to this legislation when enacted and to the processes that it was creating. The more I got into it, the more I began to appreciate just how important that was.
With the leave of the House, I will take a few minutes to explain some of this complexity but will leave it to the Minister to explain how all this works. In my discussions with the noble Baroness and her Bill team, both of whom have been extraordinarily generous with their time and in explaining this, we have between us uncovered areas in which this Bill and the code could be improved. I have not endeavoured to do that in this particular amendment, and have removed other amendments that I proposed, because I am confident that at some stage in the progress of this Bill the Government will themselves bring forward some amendments that deal with those issues that have now been uncovered.
This amendment, on plain reading, concerns the qualifications and appointment conditions for an arbitrator under the Bill and has had the benefit of shining a spotlight on a particularly unclear and potentially confusing part of the Bill. To understand how this Bill works, one has to understand the interaction of the arbitration provisions in the Bill with the existing arbitration laws in England, Wales and Northern Ireland, and also with the arbitration provisions in the code itself. It is not easy to follow all this. We are not helped by the fact that the Explanatory Notes compound this lack of clarity rather than resolving it. In particular, paragraph 30 states that the provisions of the Arbitration Act 1996 will “broadly” apply and that,
“the Arbitration (Scotland) Act 2010 will broadly have a similar effect in applying the Scottish Arbitration Rules, except so far as this would be inconsistent”,
with the groceries supply order or the Bill. That was not intended to be clear. It is intended just to report the position which is quite difficult to work out.
Lord Whitty
My Lords, I thank the Minister for making clear the distinction between a complaint leading to an investigation and one leading to arbitration. However, I still think that there should be a means whereby someone could represent a supplier through the arbitration process as well as triggering an investigation. This may not be the appropriate clause to amend in that respect. The Minister made it clear that we would have to amend the code in order to do that, which I accept.
However, the net effect is that in this Act, the code and all its operations, we have not solved the basic imbalance of power to enable individual suppliers to have the confidence to take a case under this code. Until we do that, this will be only a limited protection, which is welcome in itself and for the teeth that this Act will give them. But it does not address all the fears and apprehensions of farmers and small businesses who are reliant on supermarket orders that they will be treated absolutely fairly.
I suspect that the Minister’s colleagues will get this amendment back in another place, probably from her own side. Therefore, this is not a closed case but, for now, I beg leave to withdraw the amendment.
Lord Plumb
My Lords, I rise for the first time after something like an hour and a half of debate. I am very concerned at the way it has gone so far. I declare an interest as a farmer. In the course of the debate, I thought about the 2,500 farmers who were in Central Hall last week. Every one of them would have difficulty understanding what we have been talking about. We have rightly been talking about legal aspects of the Bill, because they have to be right and clear. However, what concerns the farmer at the moment, as a supplier of goods, is simply fairness in the marketplace. Therefore, farmers believe someone should be appointed to see that that is achieved.
That person—I presume that it will be a team—will have to take responsibility for dealing with issues not only fairly but correctly and with full understanding of what the job is about. They are not there to be involved in competition but to deal with investigation of the market that exists, or of the market that should be. The other day in Central Hall, the Minister held up a pint of milk and a bottle of water to illustrate the difference in price—56p as against 83p. A lot of questions must be asked. Surely it goes without saying that something has to be done and someone must be appointed.
If the person who is appointed finds unfairness on the other side, let it be so. That is their role and responsibility in this field. I do not agree with the amendments in this group, tabled by my noble friend Lord Howard. This amendment would leave the Bill in a similar form to the draft Bill that we saw in May 2011. Nothing has changed, and we are trying to bring about changes in the interests of the industry with which we are concerned.
The amendment would seriously narrow the sources of evidence that the adjudicator could use in launching an investigation into a possible breach of the code. That would be of considerable concern. The powers need to be broadened to allow credible evidence from any person who is prepared to come forward with a legitimate reason for asking the adjudicator to take responsibility and deal with an issue. All organisations, including charities, will have to be able to provide evidence of a breach of the code. This is a crucial element in safeguarding the adjudicator’s duty to protect the identity of the complainants. Therefore it is essential that the investigatory powers in the Bill are safeguarded but not complicated by cumbersome rules that could delay the process of ensuring a fairer functioning supply chain.
Lord Whitty
My Lords, I will be brief because the noble Lord, Lord Plumb, has spelt it out. It would be extraordinary if Amendment 8 were accepted and carried by this House. I accepted with some reluctance the noble Baroness’s indication that it would not be possible for third parties such as farming associations or unions to bring cases. I can understand that, but the idea that they should be cut out of providing information or that the adjudicator should be constrained from looking at that information and considering it before making his or her judgment seems extraordinary. I hope that the Minister will reject Amendment 8. It would tie the adjudicator’s hands and be unfair to the complaining supplier.
Lord Plumb
My Lords, I have been very impressed with what I have heard. I did not expect that there would be many in this House who would press for immediate action. I can see the point very clearly—what the right reverend Prelate has just said is absolutely right—but I would like the Minister to say whether, if there was a delay in the powers being implemented, it would complicate things and make it a much more complicated Bill. I see no reason for that, but it is a question that needs to be answered. If it would, can the Minister say, or give us a guesstimate as to how long it would be before those powers are implemented?
Lord Whitty
I, too, support this amendment. It seems to me that this clause as it stands, combined with Schedule 3 and the possible orders under it, the nature of which we do not yet know, could seriously constrain the nature and instances of the financial penalties which the adjudicator felt able to impose.
There are difficulties here. If I look at other regulators, adjudicators or ombudsmen, a delay has rarely awaited the Secretary of State before the provisions for their powers came into practice. I do not see any particular argument why that should be the case here, either immediately, in terms of the year or so’s delay in giving the powers, or in how the powers are exercised in broad terms.
I was going to widen the debate, and I shall still mention this point: financial penalties are one thing—the “fines”, as we normally call them—but quite often the most obviously appropriate remedy would actually be compensation to the supplier that had been disadvantaged by the behaviour and practices of the retailer. I have an amendment following this group that deals with that issue, but it deals with it rather crudely. I have now read the Committee proceedings on this, which indicate the complexity of writing in compensation in the way that I am proposing, and I will therefore not be moving that amendment. However, there ought also to be some process whereby financial penalties are augmented by the ability of the arbiter or the adjudicator to refer the possibility of compensation to appropriate authorities.
In reality, naming and shaming is not enough. Although I agree with the noble Baroness, Lady Randerson, that it can be important for the reputation of the company, fines are even more important in terms of that reputation. At the end of the day, though, the organisation that has been disadvantaged is the small business, the farmer or whoever it is who has been at the receiving end of the abuse. Somehow within this regulation and code there ought to be an ability for the adjudicator to recommend, possibly under the powers of recommendation, that the issue of potential compensation is referred to the appropriate legal authorities. That is missing at the moment, although it could be included within the recommendations.
The point here is that we should not be placing undue time delays or undue constraints on the ability of the adjudicator to impose sufficient redress. If we removed Schedule 3 and altered Clause 9, we would be able to put the Bill into operation as rapidly as possible and establish a more equitable balance within the supply chain.
The Duke of Montrose
Is part of the purpose of the adjudicator that the disadvantaged person should not be identified? If that is so, how do they go about talking about compensation?
Lord Whitty
The person is not necessarily unidentified; that depends on the supplier. I know that those arguments were made in Committee and I accept that it would not be for the adjudicator to impose compensation or the level of it themselves. However, it ought to be open to the adjudicator to be able to say, “It looks as if a supplier or a number of suppliers have been disadvantaged by this practice and the issue should be referred, effectively, to the courts”. That could be part of the recommendatory powers. That is not the central issue on this group of amendments, though; they are really to remove the constraints on the Secretary of State and allow the adjudicator to have a whole range of potential financial sanctions.
Lord Howard of Rising
My Lords, contrary to what has been said by some this afternoon, naming and shaming is a genuine deterrent. In a cut-throat, highly competitive business such as this—reading the results of supermarket chains shows how very quickly they can go downhill from having made substantial profits—naming and shaming is a real deterrent. I also hope that the Minister will remember that the only person who actually pays those fines in the end is the consumer.