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Groceries Code Adjudicator

Volume 736: debated on Tuesday 20 March 2012


Asked by

To ask Her Majesty’s Government whether they will allow trade associations to make complaints to the proposed Groceries Code Adjudicator on behalf of members who are both direct and indirect suppliers of supermarkets; and, if not, why not.

My Lords, the draft Groceries Code Adjudicator Bill proposes to allow the adjudicator to consider any information once an investigation has started. The only limitation is on what information it can consider when deciding whether to start an investigation. As drafted, this is restricted to information from direct and indirect suppliers and to published evidence. The Government have agreed to consider extending this to third parties, particularly to trade bodies. Ministers are taking advice and meeting representatives of both suppliers and retailers before making a final decision.

My Lords, I thank the Minister for his reply, but what evidence does the Department for Business, Innovation and Skills have that limiting the powers of the groceries code adjudicator to naming and shaming transgressing supermarkets will have the desired deterrent effect?

My Lords, the adjudicator’s primary role will be investigating complaints and uncovering breaches of the groceries code. Once the breach is uncovered, the adjudicator will be able to use the following remedies. First, it will be able to recommend to the retailer how it should comply with the code. If that is not followed, a further investigation can be launched with a tougher remedy. It can instruct the retailer to publish information on the breach—naming and shaming, to which the right reverend Prelate referred. There is then a reserve power to impose financial penalties, which will only become available to the adjudicator once the Secretary of State has allowed it by order.

My Lords, does not the Minister agree that the power of supermarkets is such that there should not be any artificial restrictions on who might be the complainants and what they might complain about? Among the possible complainants would be suppliers such as farmers, through the National Farmers’ Union, or other retailers through the British Retail Consortium. Why restrict them in any way from making complaints to the groceries adjudicator if he or she is to have any real power over the exacting power of supermarkets that exists at the moment?

My Lords, will the Minister explain why these powers for financial sanctions will not be available from day one? Given that the point of setting up the adjudicator was to deal with the findings from the Competition Commission that supermarkets were transferring over excessive risk and unexpected cost to their suppliers, why would not the strongest possible signal be sent out right from the start?

My Lords, I understand the noble Baroness’s position. On balance, we think that it would be better to start with the regime that we have proposed. As I said earlier, and as she acknowledges, we may well have to move on to what she suggests, but we would like to consider it further. One advantage of doing that is that we would have the benefit of the adjudicator’s input and experience of deciding on the framework for fines.

My Lords, why have the Government been so slow in setting up this office? People have been waiting for it for years, and the Minister sounds hesitant about it even now. How long have people got to wait?

I am sorry to hear that the noble Earl thinks that I am being hesitant. I do not think that it is reasonable to imply that we have been dragging our heels. The process was triggered in 2008 during the previous Government’s term of office by a report from the Competition Commission. I would not criticise the previous Government for dragging their heels because, in fact, they were getting on with the business of trying to persuade the grocery industry itself to put in place a process. The industry did not do that. We all want to get this right, which is why we have been through a thorough process of pre-legislative scrutiny—and I think that that is something of which noble Lords generally approve.

My Lords, we all wish to see the consumer get the best possible deal. However, this should not be at the expense of suppliers to the supermarkets; their confidence is crucial if this is to be seen to work effectively. If I might press the Minister again, will he confirm whether the adjudicator will have authority to levy financial penalties, should an abuse of power be upheld against any supermarket? Furthermore, however any resulting fine may be levied, will he confirm that this will not simply disappear to some central agency but rather be paid directly to those businesses deemed to have suffered abuse?

My Lords, the noble Lord’s question is in line with comments from the BIS Select Committee, which said that the arguments on whether to introduce fines from inception are finely balanced. I think that that is fair, and the Government’s view is that financial penalties should be kept as a reserve power, as I have said. We consider that the appointment of the adjudicator is in itself important to the effectiveness of the groceries code. The adjudicator already has sanctions available, and large retailers will immediately be conscious that if there is evidence of significant non-compliance and the existing regime seems not to be sufficiently effective, there is the prospect of a swift introduction of financial penalties. As to the noble Lord’s last question, as the Treasury Whip I could not possibly say where the proceeds will go.

My Lords, I am sure that the House will agree that the question asked by the noble Earl, Lord Sandwich, is very pertinent. I thought that my noble friend could have been slightly more robust in explaining the reason for the delay. Can I press him further: if this does not prove to be a satisfactory structure, will the Government be prepared to legislate further?

In fact, my Lords, if this does not prove to be a satisfactory structure and if I interpret my noble friend rightly to be implying that we need fines, that is already in the draft Bill.