Groceries Code Adjudicator Bill [Lords]

Michael Connarty Excerpts

Monday 19th November 2012 Commons Chamber

[Jo Swinson]

It is important to bear in mind that this will be an independent adjudicator who will conduct an investigation that will consider all the evidence before coming to a conclusion about specific supermarkets and what they have or have not done. General concerns about the supermarket supply chain have not left consumers in quite the same position of being able to take action, unless, for example, they decide to stop shopping at supermarkets altogether. The Bill is likely to drive change. Consumers have been involved in a variety of movements whereby their concerns about certain issues have driven change in the behaviour of suppliers. Indeed, that was the case with milk prices this summer. Drawing on my personal experience, before I was a Minister I took complaints about misleading advertisements to the Advertising Standards Authority, so I know very well the power of a negative finding, the publicity that goes with it and how companies take it seriously and are very keen to avoid such an occurrence.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Does the Minister not realise that the code makes absolutely no reference to the need to address the supply chains of the major supermarkets in order to prevent modern-day slavery, such as that in the Noble/Freedom Food eggs case? I have written to her about the need to incorporate into this Bill the principle in my private Member’s Bill, the Transparency in UK Company Supply Chains (Eradication of Slavery) Bill. Nothing in this code addresses supply chains, but surely one of the ways to get a level playing field is to prevent major supermarkets from exploiting labour brought into the country as a result of human trafficking to undercut the competition.

[Jo Swinson]

The hon. Gentleman raises serious issues, not least that of legality and human trafficking. If there is evidence of law-breaking, it should be taken to the appropriate authorities so that it can be followed up. I appreciate his concern, but the adjudicator’s role and the groceries code have been developed in response to the Competition Commission report of 2008. Notwithstanding the serious issues that he raises, the way to proceed is to focus tightly on the report, which provides the clear basis for addressing the problem and consumer detriment that we are trying to solve. Although I have explained to the House that the code is not a panacea that will solve every possible problem, it does mean that we can continue with a strong degree of consensus and cross-party support.

--- Later in debate ---

[Ian Murray]

The code is there for everyone to see, and was introduced before the general election. The next paragraph in my speech pays tribute to the hon. Member for St Ives for all his work. If I had my pen handy, I might cross that out, but I would not be so churlish. I therefore pay tribute to the hon. Gentleman, who chairs the Grocery Market Action Group. He has harnessed the support of organisations such as the Rural Shops Alliance, the Association of Convenience Stores, the National Farmers Union, the Farmers Union of Wales, the National Farmers Union of Scotland, the British Independent Fruit Growers Association, the British Brands Group, Traidcraft, ActionAid UK, Banana Link and many others in pushing the agenda from the early days of the Competition Commission inquiry, which he mentioned, in 2006 through to the establishment of the new groceries supply code of practice. He deserves great credit for continuing the fight, and I hope that he will support the Opposition in wanting to create a robust adjudicator.

I also take the opportunity to put on record thanks to my hon. Friend the Member for Ynys Môn (Albert Owen), who is in his place and has long championed the establishment of an adjudicator. It is now more than two years since his private Member’s Bill—the Grocery Market Ombudsman Bill. In the debate on Second Reading of that measure, he made it clear that the concept of a grocery ombudsman or adjudicator was not about being pro or anti any particular interest group, but about fairness, and the Opposition echo that sentiment. Nevertheless we are here now and, in a sense of cross-party support, we wish the Bill a swift passage on to the statute book. It is important, however, to get the legislation right, and although the Opposition are generally pleased with the current Bill, we will seek to strengthen it so that the adjudicator has the powers it needs to be effective from day one.

As the House will be aware, competition authorities have held two major inquiries into the grocery market. The first, by the Office of Fair Trading in 2000, led to the creation of the code of practice to regulate the relationship between the largest supermarkets and their suppliers. In 2006, the Office of Fair Trading referred the market to the Competition Commission, which completed a second inquiry in 2008. At the time, the commission said that,

“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.”

It recommended a strengthened and revised code of practice to be enforced by an independent ombudsman—an unambiguous case for an adjudicator. As a result, in February 2010 the Labour Government brought in the groceries supply code of practice—GSCOP—to replace the supermarket code of practice, with the intention of putting the adjudicator on a firm statutory basis.

I am sure Members across the House will appreciate the work of the Business, Innovation and Skills Committee, which is brilliantly chaired by my hon. Friend the Member for West Bromwich West (Mr Bailey) who I see is in his place. He did a diligent job on the Bill during pre-legislative scrutiny—I should perhaps declare an interest as I was on that Committee at the time and have probably just patted myself on the back a little.

In its report, the Committee raised two concerns about the way the adjudicator’s office would operate. First, it was anticipated that the office would be able to launch investigations based only on evidence supplied by retailer or suppliers. The Committee argued that third parties such as trade associations or whistleblowers should be able to submit complaints about retailers. I am pleased that the Government made changes in that respect prior to Second Reading in the other place. They are to be commended on that alteration which the Opposition consider key to ensuring that individuals have the confidence to come forward with complaints under the cover of an industry group to protect anonymity and secrecy.

Secondly, the draft Bill allowed the adjudicator to impose fines on retailers that had breached the code, but only if the Secretary of State made provision for that by order. The Committee rightly argued that the adjudicator should be allowed to impose fines from day one—I shall return shortly to that crucial point.

There is little doubt that this legislation is necessary, and it is important to emphasise that supermarkets and retailers support the adjudicator in principle. One such retailer wrote to me privately earlier this week and stated:

“The groceries code adjudicator will encourage fair and robust regulation of supplier-retailer relationships.”

That speaks volumes.

We will scrutinise the Bill to ensure that it delivers on three key tests—that it promotes innovation and investment in the supply chain; ensures a fair deal for farmers and producers; and delivers better outcomes for consumers in terms of prices, quality and service.

[Michael Connarty]

As my hon. Friend will have heard in my earlier intervention, having read through the code it seems there is absolutely nothing in it to protect the labour factor in the supply chain. Will my hon. Friend take on board the need to raise that issue in Committee and table amendments so that people who use gangmasters cannot hide behind them if those gangmasters then use crooks, as recently happened in the Noble/Freedom Food eggs case, which I believe is now going to court?

[Ian Murray]

I know that my hon. Friend has worked on the Gangmasters Licensing Authority, and we will take that debate forward to Committee. The Gangmasters Licensing Authority has been downgraded under this Government—indeed, the Beecroft review recommended that it be scrapped. We must be vigilant and ensure that the great work done by that authority in saving lives and stopping exploitation continues, and we can debate that in Committee. If I look towards the Whips, perhaps my hon. Friend will join us on that Committee to make those points—his name is being jotted down as we speak.

I was talking about the huge impact and value that supermarkets bring to our economy. The groceries market was worth nearly £157 billion in 2011, and it provides significant choice and good value for customers, which is vital. A number of supermarkets in my constituency do a tremendous job through investment in our high streets, job creation, and supporting community projects, and I am grateful to them for that positive role. I also place on record my thanks to Sainsbury’s at Cameron Toll in my constituency for its continued support for my schools Christmas card competition. Likewise, farmers and small suppliers play a critical part in achieving economic growth. It is an incredibly difficult time to be a farmer or small supplier in the UK—there have been increases in feed prices, not to mention the difficulties that many small and medium-sized enterprises have experienced in accessing finance. We should set retailer abuses against that backdrop.

We should acknowledge that retailers have done much to clean up their supply chains, but we know that abuses by retailers against suppliers still occur, and that evidence supports the need for a groceries code adjudicator more than ever. FoodDrinkEurope, the European federation, surveyed businesses from around Europe anonymously. It asked whether businesses had been confronted by various situations, and the survey gives us a picture of the situation in the UK. Seventy-seven per cent. of businesses said they had experienced non-respective contractual terms; 75% said they had experienced de-listing threats to obtain unjustified advantages; and 60% said they had experienced unilateral deductions to invoices. Only a very small number of the businesses interviewed—3%—said that they had done something other than discuss the situation with their customers. When asked why, more than half said they did not believe in the effectiveness of the remedies by public or legal authorities, and 44% said they were afraid of commercial sanctions. In one case of which I am aware, the supplier—a salad grower based in Yorkshire—said:

“The retailer has reneged on a commitment to cover the costs of packaging should they terminate dealings with me at short notice—despite this being confirmed”

on numerous occasions in e-mails.