Groceries Code Adjudicator Bill [Lords]

Mark Spencer Excerpts

Tuesday 26th February 2013 Commons Chamber

[Philip Davies]

No, I do not agree with that at all. I will come on to this point in a bit more detail soon, but the hon. Lady is forgetting something. The big supermarkets, without a shadow of a doubt, are massive companies that have hundreds of stores in their chains. By definition, a viable supplier to a supermarket chain has to be a very big company as well, otherwise it would not have the wherewithal to supply all the supermarket’s branches. When I get to the detail of my new clauses, I will talk about the thresholds that the Bill should apply. She will see that far from it being the case that vast supermarkets are being awful to very small suppliers, many of the suppliers are bigger than the supermarkets that they are supplying. She ought to bear that in mind.

[Mr Mark Spencer (Sherwood) (Con)]

My hon. Friend misunderstands the whole supply chain in the UK. There are organisations that provide hubs to supply supermarkets, but those hubs are supplied by very small primary producers such as family firms. Those firms are microscopic in comparison with the supermarkets.

[Philip Davies]

My hon. Friend makes a good point. If he has a big problem with the middleman, so to speak, for example in the dairy industry, he should pursue his complaint with the middleman, rather than having a go at the supermarket.

The hon. Member for Alyn and Deeside (Mark Tami) made a point about special offers. There is a view that supermarkets have been forcing suppliers against their will to do special offers, such as buy one, get one free or buy three for two. Let me tell the House, as somebody who has worked in this environment, what happens in the real world, rather than in the invented world that people want to talk about.

My hon. Friend the Member for Fylde (Mark Menzies) is here and he will know what happens as well as I do because he worked for Asda at the same time as I did. He will recall that, before I left, Asda decided that it did not want to do special offers any more and that it would have no special offers in its stores. It did not want any buy one, get one frees or three for twos. It asked its suppliers instead to just sell it the product at an everyday low price and to put what they would have invested in a promotion into providing that price. It was not companies such as Asda that were forcing suppliers to do buy one, get one frees; suppliers were falling over themselves to do special offers in the supermarkets and to get their products in the promotional areas.

Some of those firms have massive marketing budgets. They have marketing budgets that supermarkets would love to have. They use that budget to do offers such as buy one get one free or three for the price of two. They are trying to persuade people who buy Daz for their washing, for example, to move to Persil. To persuade people to do so, they give them a buy-one-get-one-free offer.

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[Philip Davies]

As ever, my hon. Friend is eagle-eyed. The amendments are the same, but the purpose of tabling two was to give the House a choice, because as it happened, I envisaged the interventions that the hon. Member for Alyn and Deeside (Mark Tami) has made.

At Asda, we found huge reluctance on the part of suppliers to stop special offers. They lobbied Asda for ever to do more and more of them to promote their brands, and an everyday low price did not offer them the same marketing opportunity.

[Mr Spencer]

I applaud my hon. Friend’s campaign to get his whites whiter, but he must recognise that there is a fundamental difference between a supplier of a brand of washing powder and a supplier of a cauliflower, carrot or parsnip, because it is not possible to brand a carrot or a cauliflower.

[Philip Davies]

I am grateful to my hon. Friend, and again, I take his intervention as a signal that he will support my amendment. That brings us on to the nub—

[Philip Davies]

I am grateful, Mr Speaker, and you are absolutely right, as ever. My hon. Friend the Member for Sherwood (Mr Spencer) seems to indicate that he is prepared to support new clauses 1 and 2, and I will be grateful to him for that. It seems that the longer we go on, the more support I am garnering for my case, so I am encouraged to go on a bit longer.

[Mr Spencer]

My hon. Friend will recognise that putting a figure on turnover as suggested in the new clauses would mean that there was a difference between somebody supplying a low-value product such as a carrot and somebody supplying a high-value product such as a bottle of champagne. If we were to put a firm figure in the Bill, as time and inflation moved inevitably forward, that figure would become smaller and smaller in real terms and small and medium-sized enterprises would be dragged over the threshold.

[Philip Davies]

My hon. Friend appears to be indicating that he prefers new clause 2 to new clause 1, which further persuades me that I should seek to press new clause 2 to a Division, if you allow me to do so, Mr Speaker.

The Bill was sold to people on the back of what I believe was a false premise—the idea that supermarkets are screwing suppliers into the ground remorselessly and hoping that as many of them as possible will go bust. It is a completely nonsensical argument.

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[Philip Davies]

My hon. Friend makes a good point, which strikes at the heart of new clauses 1 and 2. We can argue about the necessity of the Bill, and as far as I am concerned it is not only unnecessary—as my hon. Friend the Member for North Swindon (Justin Tomlinson) made clear, there are no complaints about the existing code, so it is a solution looking for a problem—but the most unconservative-minded thing that we could possibly see. I have no problem with the Liberal Democrats supporting it, because of course they are always a left-wing tribe, but I am worried that members of my own party are supporting this intervention in the free markets.

Two companies, free to make their own decisions, are making agreements and signing a contract, and then we in the House think that we should intervene in that contract that they have both entered into freely and say, “By the way, we don’t think you should have signed that contract.” I have always thought that companies are more than capable of deciding those things for themselves.

[Mr Spencer]

Again, my hon. Friend misunderstands the concept of what the groceries code adjudicator is intended to achieve, which is related to exactly the point that he has just made. When an agreement has been made between two parties, if both sides stick to it there is no problem, but there is a problem when one side tries to change that agreement and goes back on it at a later date.

[Philip Davies]

My hon. Friend makes a good point, and he seems to make the point that the Bill is totally unnecessary. I am not a lawyer—my hon. Friends the Members for Christchurch (Mr Chope) and for Bury North are, and I will happily bow to their expertise—but it seems to me as a layman that if two sides sign a contract and one side then breaks it, there are already laws in place to ensure that the matter can be seen through in the courts. The courts ensure that contracts entered into voluntarily are honoured, so we do not need to do that. The Office of Fair Trading already looks after the groceries code, which deals with these matters anyway.

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[Philip Davies]

This is a red letter day for me, because I now have another volunteer to support my new clause 1 and new clause 2, which I will come on to in a second. The hon. Gentleman may well not have read them and therefore may have intervened inadvertently, but when he actually finds out what is in new clause 1 and new clause 2—if I am ever allowed to get on to that—he will find that he agrees with the point I am making. I do not agree with the principle of the Bill; I am the first to make that clear, and that relates to the purpose of new clause 3. On new clause 1 and new clause 2, the Bill was sold on the premise articulated by the hon. Gentleman—we have big supermarkets that are in a vastly preferential situation to very small suppliers, and that the House should be looking after those very small suppliers where they face problems. That is the premise of the hon. Gentleman’s point, and that is what my hon. Friend the Member for Sherwood is indicating. That is how the purpose of the Bill was sold.

I believe the Bill is totally unnecessary, but I am the first to accept that that is a minority view and that it will go ahead. My new clauses seek to ensure that the Bill hits its given purpose—to look after the small suppliers that my hon. Friend the Member for Sherwood is rightly keen to look after. I do not disparage him for that. Currently, the Bill will not just look after the small suppliers that my hon. Friend and the hon. Member for Corby (Andy Sawford) are so concerned about; it will give an avenue for complaint to all suppliers of supermarkets, whatever their size. All I can do is reiterate the fact that the vast majority of suppliers to supermarkets are huge companies in their own right, and that some of them are bigger than the supermarkets they supply.

Let us make no bones about it. One way or another, the suppliers—whether in terms of special offers, deals or whatever—hope that ultimately the adjudicator will deliver a benefit to their bottom line. Suppliers hope, through whichever avenue, that this will ensure that they have a healthier bottom line.

[Mr Spencer]

My hon. Friend must also recognise that the role of the groceries code adjudicator is as a referee. If a large corporation—we all know they exist—is in a trading disagreement with a supermarket, then the supermarket could use the groceries code adjudicator to make sure that it gets a fair deal from that large supplier.

[Philip Davies]

My hon. Friend makes his point. As it happens, I am a Conservative. I know it is an old-fashioned view these days in the Conservative party, but I believe in the free market. Companies such as Asda, Tesco, Morrisons and Sainsbury’s are big enough to look after themselves. They do not need a referee to look after a contract on their behalf against any supplier; big companies are more than capable of doing that themselves. My hon. Friend may take the point that it is the role of Parliament to intervene in every contract negotiation between two companies.

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[Mr Spencer]

Again, my hon. Friend is misrepresenting the role of the groceries code adjudicator. When a deal is done between two suppliers, whether large or small, as long as it is stuck to, there will be no role for the adjudicator. Those large companies can do their negotiations, and those deals will stand fast. The adjudicator would get involved only when the supermarket goes back and tries to change the original agreement. That is its role.

[Philip Davies]

So my hon. Friend does not think that Procter & Gamble is big enough to look after itself. He thinks poor little Procter & Gamble—that poor mite—needs a state adjudicator to intervene on its behalf because it might find itself at the wrong end of an unfair negotiation with a supermarket.

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[Philip Davies]

My hon. Friend makes a good point. The Bill would still allow Walkers to screw the potato suppliers—who provide the raw materials—into the ground as much as it liked, but it would prevent Asda, for example, from trying to negotiate the best deal with Walkers for its crisps.

I have mentioned Coca-Cola. I also wonder whether Heinz Ltd would really need to take a complaint to an adjudicator. Is Heinz not big enough to look after itself? Why on earth are we passing legislation to intervene in disputes between big supermarkets and big suppliers such as Heinz, Diageo, United Biscuits, Kraft Foods, Nestlé, Premier Foods, Fullers Foods, Britvic Soft Drinks Ltd and Mars? Are we really saying that the House must set up a state regulator to intervene in negotiations or disputes between massive multinational companies? Those companies have recourse to the courts if they feel that a contract has been breached. Are we really saying that Heinz does not have the wherewithal to take a case to court if it feels that a supplier has dealt with it unfairly? Does anyone want to stand up and say that Heinz does not have the wherewithal to take such a case to court? Who wants to make that point?

[Mr Spencer]

rose—

[Philip Davies]

My hon. Friend does.

[Mr Spencer]

I will happily challenge my hon. Friend on that point. Those large companies have the ability to negotiate deals, and those deal will be stuck to. The groceries code adjudicator will not get involved in those kinds of negotiations. The adjudicator will have a role to play when a supermarket tries to go back on a deal and change it at a later date.

[Philip Davies]

We all know that that is the case, but my point is that if companies such as Heinz, Walkers, Nestlé or Coca-Cola feel that a supermarket has breached a contract with them, they can take the case to court. We do not need the state to set up an adjudicator to decide which side is right. As it happens, I am quite relaxed about supermarkets trying to screw those big suppliers into the ground to get the best possible deal. Those suppliers are making massive profits, and I would prefer to see that money benefiting my constituents rather than adding to the bottom line of those multinational companies.

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[Mr Spencer]

I shall not detain the House for long, but I want to make some general comments about some of the amendments and new clauses.

I rise with an enormous amount of frustration, because in my opinion a number of Members seem not wholly to understand the role of the adjudicator and how they will fit in to the grocery supply chain in the United Kingdom. There has been an enormous amount of debate on new clauses 2 and 3, tabled by my hon. Friend the Member for Shipley (Philip Davies), which I would like to explore. I understand his motivation in trying to ensure that the adjudicator deals with smaller companies, but I think he misunderstands how the grocery supply chain works.

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[Philip Davies]

My amendment does not seek to restrict the remit only to very small suppliers but to suppliers with a turnover of up to £1 billion; surely my hon. Friend cannot argue that a supplier with a turnover of £950 million is a very small supplier.

[Mr Spencer]

I am grateful to my hon. Friend for his intervention, as it allows me to clarify that that is my exact point. At no point will there be such a negotiation, as this is not a David and Goliath situation. We are talking about two Goliaths, so the adjudicator will have no role. My hon. Friend has made a career of criticising unnecessary legislation and it seems strange that he should now want to introduce an unnecessary clause into a Bill. I hope that he recognises that new clause 2 would not be necessary simply because the adjudicator will not have a role in negotiating between two Goliaths.

[Justin Tomlinson]

Surely the new clause will send a crystal clear message to the adjudicator, when they take on the role, about where they need to focus their efforts.

[Mr Spencer]

Again, there is a misunderstanding of what will happen. We are talking about very large companies that are negotiating with very large companies. They both have an equal amount of commercial muscle, so no one party will be able to bully the other. That is quite important. The adjudicator is meant to get involved as a referee and negotiate when one large party abuses a smaller party and uses its commercial muscle to push something through.

[Andrew George]

I support the arguments that my hon. Friend is making. He knows that this is a dynamic and creative market in which a number of intermediaries and subsidiaries have been created with a turnover of more than £1 billion, which could be used as a means of sidestepping the legislation if new clause 2 was accepted.

[Mr Spencer]

I recognise that. I pay tribute to the hon. Gentleman, who has worked on this matter since before I became a Member. Perhaps that is something that the adjudicator could look at as we move forward. There is this ability to put a film between parties and cause an issue. That comes back to small suppliers, who supply the middlemen.

New clause 3 would cause the Bill to expire after seven years. It would be disappointing if it did so. Using the analogy of a football match, if we get to half time and the referee has not needed to issue a yellow card, no one suggests that we do not need a referee in the second half.

[George Eustice (Camborne and Redruth) (Con)]

We have had plenty of time to understand how supermarkets deal with their suppliers and it is precisely because of that that everyone who has looked seriously at this issue has concluded that we need an adjudicator.

[Mr Spencer]

I am happy to agree with my hon. Friend and I pay tribute to the work that he has done to bring the legislation to this point.

[Mr David Nuttall (Bury North) (Con)]

Does my hon. Friend agree that, regardless of whether there have been complaints, the existence of the adjudicators office will bring a cost so it would make sense to bring the whole thing to an end if it is not proving worth while to the consumer?

[Mr Spencer]

My hon. Friend makes an interesting point. We could make the same argument across government; if crime starts to fall in an area, do we withdraw the police because they are not necessary? We have to have a referee to make sure that the rules are being obeyed. The groceries code adjudicator will be a great referee and will have the teeth to make sure that the Goliath does not bully the David. That is something that the Government should be proud of and take forward to bring a little parity and common sense to the market.

[Huw Irranca-Davies]

I am pleased to speak in this debate and I welcome the speeches that have been made so far. I did not expect it to be as sparky as it has been, but I welcome that because it allows us to flush out the arguments about the amendments and new clauses, as well as the fundamental principles of what we are trying to achieve.

I did not intend to speak to new clauses 1, 2 and 3, but I wish to reiterate the comments made by the hon. Member for Sherwood (Mr Spencer), the right hon. Member for South East Cambridgeshire (Sir James Paice) and others. A great deal of discussion in Committee focused on the fact that the adjudicator’s office will intentionally be small, mean and lean. It will not be some behemoth, as the hon. Members who spoke to new clauses 1, 2 and 3 suggested it would be. It is supposed to be an intelligent organisation that does not go on fishing expeditions but responds to good intelligence. I suspect that if there are no cases to follow, the report will be very slim indeed. I suspect that the adjudicator will not respond to Procter & Gamble or anyone else if they are asked, “Please look at the power relationship within the supply chain and how we are being disgracefully abused.”

The hon. Member for Shipley (Philip Davies) spoke to new clauses 1, 2 and 3 at great length. New clause 3 gives the reality to the mission, which is at a set moment in time to get rid of the adjudicator, which would fly in the face of the advice that has come down over years from the Competition Commission and others that there is a need for such an adjudicator. Lean and mean, yes, but the hon. Member for Shipley should have some faith in the adjudicator and, having advertised the position and given her the power and set up the office on a lean, mean basis, he should allow her to decide where to investigate to achieve a good, efficient supply chain.

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[Ian Murray]

I will be quick, but let me start by returning the thanks to the Front-Bench team—the Minister of State, Department for Environment, Food and Rural Affairs, and the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), who I recall on Second Reading stamped her authority and said that we would not have fines in the Bill. We now have fines. They stamped their authority in Committee and said that they would not send the appointment of the adjudicator to the BIS Select Committee because it would be a dereliction of their parliamentary duty and was not an important enough position to be subject to a Select Committee pre-appointment hearing. I am delighted that Ministers have come round to our way of thinking. I am also delighted that they came round to the way of thinking of the other place by putting trade associations into the Bill. The Bill is far better now than when it first entered the House, and the Ministers listened to some close analysis and persuasion from the Opposition.

Let me right a wrong that happened in Committee. It is traditional at the end of Committee proceedings to thank all the officials, the Chair and everyone who has been involved in the Committee. I forgot to thank one person—my hon. Friend the Member for Ogmore (Huw Irranca-Davies)—when I was wrapping up the Committee. He has done more in the House than many to get us to where we are today, and I would like to right that wrong by putting on record my thanks to him for everything that he has done and, of course, for his wonderful speech earlier today.

I have tried twice to thank the hon. Member for St Ives (Andrew George) both in the Chamber on Second Reading and in Committee. Just before thanking him, he popped up and threw a wobbler at me of some description. I am delighted that I have been able to thank him today without him doing that.

Of course, my hon. Friend the Member for Ynys Môn (Albert Owen) first brought the matter to the House in his private Member’s Bill, and it should be a proud moment for him today as we send the Bill to the palace for Royal Assent. The last two thanks are to everyone who served on the Committee. We had lively debates. I am disappointed that my hon. Friend the Member for Vale of Clwyd (Chris Ruane) has not taken the opportunity to be in the Chamber. The Under-Secretary of State for Business, Innovation and Skills, had been on her feet for only about 20 seconds in Committee when my hon. Friend popped up and suggested that we should call the new adjudicator Oftrolley. I could not let the moment pass without putting it on record that I am disappointed that he is not here.

We have used a lot of terminology such as “toothless tiger”, and there was a danger that the Bill would be that. The Bill now has teeth. There are still some things that Opposition Members would have added to the Bill, but unfortunately that has not come to pass. We hope that the Ministers will be amenable to changing the way in which the adjudicator works as the process beds in. There are problems with the code itself. The hon. Member for—is it East Bedfordshire?

[Mr Spencer]

Sherwood.

[Ian Murray]

Sherwood, of course. I was not even in the right part of the country. The hon. Gentleman used the example in Committee of the dairy farmers dispute. In fact, that dispute would not have been covered even if the adjudicator had been in place, because there had not been a breach of the code. That example was interesting in terms of trying to keep the code live and make sure it is as responsive to the industry as possible—not just to the suppliers. The hon. Member for Shipley (Philip Davies) made some important points. It needs to be responsive to the supermarkets. They make such a considerable contribution to our economy, and we must not forget the role they play. The code has to be responsive to their needs too.

We set three tests for the Bill at the outset, and we have met all of them. We are a little disappointed on intermediaries and supply chain issues, and I hope that Ministers will reflect on those. I gave a commitment on Second Reading and in Committee that we would work constructively with the Government to make this a better Bill. We have done that and we have got a better Bill. Everyone who has been involved in this process for far longer than I have been should be very proud tonight that we will have an adjudicator and, I hope, a far better supply chain and a far better supermarket market.

[Mr Spencer]

I shall just take 60 seconds to add my congratulations to those on the Front Bench for introducing this Bill. I also pay tribute to the hon. Member for Ynys Môn (Albert Owen) who, before I was a Member of Parliament, had pushed this issue forward through a private Member’s Bill. It is worth noting that it took a change of Government for the Bill to receive Government support, and the coalition should be proud that it has managed to introduce legislation that will level the playing field.

All hon. Members can support fair play, and it is worth reminding everyone that the Bill is not about an adjudicator poking their nose into a private deal or relationship between a supplier and retailer. It is about ensuring that, after they have done the deal, they all stick to the rules and play by the book. I am very proud that the coalition Government have introduced the Bill and will get it on to the statute book. I look forward to fair play in the retail sector.