Groceries Code Adjudicator (Permitted Maximum Financial Penalty) Order 2015

Lord Young of Norwood Green Excerpts

Monday 2nd March 2015 Grand Committee

In closing, I repeat that in debating this order today we are reflecting Parliament’s will to give the Groceries Code Adjudicator access to the full range of enforcement options that she needs to do her important job as effectively as possible. I am confident that granting the adjudicator this additional power will strengthen her ability to deliver fairness in the commercial relationships between the supermarkets and their suppliers. A fair and transparent market is good news not just for suppliers but for the sector as a whole and for consumers. It will promote competition and foster innovation. I hope therefore that noble Lords will support the order.

[Lord Young of Norwood Green (Lab)]

My Lords, we do support it. I welcome the introduction by the Minister but I have a couple of points to make. I welcome the Government’s decision to reject the retailers’ view that somehow the maximum penalty should be much more complex, and to keep it simple at 1% of turnover. The question of whether this is absolutely the right figure is something that we can look at in the review next year.

I also welcome the point about the wide powers of investigation and the increase in resources. It must have been a coincidence but, as I was flicking through the pages of the Sunday Times business section, I happened to notice a little article about a German supplier to a company complaining that the company had a four-month payment regime, whereas, interestingly, Germany has a one-month regime. I have not been able to verify that but the Groceries Code Adjudicator commented that she did not propose to launch an investigation into this. I was a bit surprised at that, as I thought the area would be worth some investigation. Four months seems a significant period of time for a company to withhold payment to its direct suppliers. I would welcome the Minister’s response to that.

[Lord Popat]

I am grateful to the noble Lord, Lord Young, for his contribution and for accepting this SI. He mentioned the penalty of 1%. In many ways, he is right; I think it is best to keep it simple. One per cent is a maximum. Bearing in mind that the turnover of large supermarkets can exceed £1 billion, 1% can be a substantial sum of money. Again, if we find that this is not the correct amount, we can always review the legislation.

The noble Lord mentioned the article in the Sunday Times. I have a copy of it attached to my file. Lidl was the supermarket in question. I am sure that this matter will be investigated by Christine Tacon. The payment period is longer in the UK than in Germany, but there has been no Grocery Code Adjudicator investigation. The Grocery Code Adjudicator is independent. The Small Business, Enterprise and Employment Bill, which is having its Report stage tomorrow, is looking at prompt payment and will probably incorporate what Lidl has done to its suppliers by delaying payment for as long as four months. It might come under that jurisdiction rather than the Grocery Code Adjudicator.

[Lord Young of Norwood Green]

That might be the case, but the Grocery Code Adjudicator made a public statement that she did not intend to investigate it—so it is an important decision. There ought to be some dialogue with the Grocery Code Adjudicator to find out why this does not merit at least something, even if it is not a formal investigation. It is quite an important issue, and I would have thought that it merited some investigation. I cannot say that I am completely satisfied with the reply. I am not expecting the Minister to respond now, but when he has had further opportunity to reflect, perhaps he will.

[Lord Popat]

My briefing states that the GCA is independent and the small business Bill will look into it. I will certainly write to the noble Lord. The article states that the company pays its suppliers in Germany in 30 days but takes four months to pay in the UK—so it is something that we must look at.

The GCA’s published guidance commits her to a stepped approach to enforcement. The adjudicator has said that wherever possible, she will rely on informal regulatory actions to secure compliance with the code. For example, the adjudicator has secured the agreement of most of the supermarkets to limit forensic audits of transactions with suppliers to the previous two years, rather than six years. The GCA meets Ministers regularly and its performance will be reviewed by Ministers in 2016, so I think it is best if I write to the noble Lord on this matter. I read the article in the Sunday Times and have a copy with me. I will refer it to officials and write to the noble Lord.

Motion agreed.