Skip to main content

Groceries Code Adjudicator Bill [HL]

Volume 739: debated on Tuesday 24 July 2012

Third Reading

Clause 21 : Amendments and transition

Amendment 1

Moved by

1: Clause 21, page 9, line 26, after “of” insert “the Arbitration (Scotland) Act 2010 or”

My Lords, in our discussion of Clause 2 of the Bill on Report, I mentioned that we had identified that it would be sensible to bring Article 11 of the groceries supply order 2009 up to date to reflect the Arbitration (Scotland) Act 2010. I said that we would consider a minor and technical amendment to the Bill to facilitate this, and we are now proposing such an amendment. This was helpfully prompted by the amendment to Clause 2 proposed by the noble Lord, Lord Browne, on Report.

The purpose of this amendment is to enable the Competition Commission to ensure that the order is updated to reflect the Arbitration (Scotland) Act 2010. The need for an amendment follows in particular from the fact that Article 11(8) of the order refers to Sections 67 to 69 of the Arbitration Act 1996 but not to the similar provisions of the Arbitration (Scotland) Act 2010.

Section 161(5) of the Enterprise Act 2002 prevents the order being varied unless the OFT advises that the variation is appropriate by reason of a change of circumstances. Clause 21(5) of the Bill already facilitates the updating of the order to reflect the Bill by disapplying Section 161(5) in the case of variations of the order which are consequential on the Bill. This amendment now extends the disapplication of Section 161(5) to cover variations which are consequential on the Arbitration (Scotland) Act 2010. Clause 21(5) will enable the Competition Commission to make these consequential changes in a straightforward way, following enactment of the Bill. I beg to move.

My Lords, I welcome this amendment and I am grateful to the Minister who, as she indicated in her introductory remarks, had said that she would bring such an amendment forward. It is relatively simple and I am grateful to her for being as good as her word and achieving this before the Bill leaves your Lordships’ House.

I am also grateful that she recognised that this arose from my worrying away at the arbitration provisions of the Bill. I was aided and abetted by the inestimable Michael Clancy, who is the law reform director of the Law Society of Scotland. I think we should call this the Clancy amendment, actually, because his work uncovered this lacuna in the Bill, which the Government have graciously recognised and corrected.

Of course, this provision anticipates that the Competition Commission will amend the order. The very process of amending the order, in the light of the next amendment that we come to, is a mouth-watering prospect and creates a great opportunity for the farmers of the United Kingdom to have some sort of step taken that protects their livelihoods for the future.

I do not want to anticipate that amendment, but we now know that the order will need to be amended because of this simple provision. I am grateful to the Minister for the way in which she has conducted herself throughout the consideration of this Bill, and her willingness—and the willingness of her Bill team—to listen to arguments for change to the Bill, and to allow them. I entirely support this amendment.

Amendment 1 agreed.

Clause 22 : Definitions

Amendment 2

Moved by

2: Clause 22, page 10, line 8, at end insert “and as varied by any subsequent order made under that section”

My Lords, after a good Report stage last Monday, when we were grateful to the noble Baroness, Lady Wilcox, for some concessions, particularly her generosity to my noble friend Lord Browne, I did not think that there was anything left for us to do today at Third Reading, because we want this to get on the statute book as soon as possible. I share the comments of my noble friend Lord Browne in respect of the way in which the Minister has handled the passage of the Bill through this House, and I am grateful to her Bill team and to those who have assisted me.

Naturally, I was disappointed not to have persuaded enough of your Lordships of the need to give the adjudicator teeth but I naturally respect the clear will of the House and hope that that issue can be addressed in the other place. I was also disappointed that we gained nothing on the issue of a living code, but I also regarded that issue as settled.

However, all that changed at the weekend, which is why we are revisiting an issue raised in an amendment that was not moved on Report by my noble friend Lord Kennedy of Southwark. The amendment is simple enough in ensuring in clear English that the groceries code supply order is defined to include, “any subsequent order made” by the Competition Commission under Section 161 of the Enterprise Act 2002. The Minister may tell us that that is unnecessary because any successor order would, as is usual, replace the 2009 order and the Bill would apply to the new order. If that is so, I would be grateful for confirmation.

I would also be grateful for confirmation of a few other things following the events of the weekend. Following the blockading of dairy processors by farmers, crisis talks were held at the Royal Welsh Show on Sunday, led by Mr Jim Paice, the Farming Minister. According to every news report I have seen, the Minister said that he would raise within government the possibility of a role for the grocery code adjudicator in providing a means of arbitration for a code governing the whole supply chain for the dairy industry. This means that the issue that we voted on last Monday is effectively being reopened by the Government. The Companion states at paragraph 8.146 relating to admissibility of amendments:

“The principal purposes of amendments on third reading are … to clarify any remaining uncertainties”.

I am mindful that the Companion goes on to say that an issue that has been fully debated and voted on cannot be reopened, which is why I have moved this amendment in relation to Clause 22.

I merely want the Minister to use this opportunity to clarify the uncertainty around the Government’s position. Has the noble Baroness spoken to Jim Paice about extending the role of the adjudicator since this weekend? On Report, she said:

“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”.

Is that still the Government’s position despite the position of the farming Minister?

The Minister also said that,

“it is for the competition authorities to decide whether or not to amend the code—not … the Secretary of State”.—[Official Report, 16/7/12; col. 17.]

Does that extend to Jim Paice? I know he does not know the price of milk but does he know about the independence of the competition authorities from Ministers? Is there any question of him now asking the competition authorities to extend the code or to come up with an additional one?

The Minister persuaded the House, including an impressive solid turnout from the Lib Dems, as ever, with their effective new Chief Whip, to defeat any notion of extending the code. This amendment merely seeks to be helpful in case Jim Paice is driving a policy on this from Defra rather than the noble Baroness or Norman Lamb driving it from BIS. I doubt whether the Minister will accept it but I would be grateful for answers to three simple questions. First, has she spoken to Jim Paice about this since the weekend? Secondly, is it still government policy that the code will apply only to the relationship between direct suppliers and large retailers? Thirdly, will the Government be asking the Competition Commission to revise or devise a code to cover prices across the dairy supply chain?

Yes, I am moving an amendment. But it is also a way to allow the Government to resolve an uncertainty around the role of the groceries code adjudicator, which is the subject of the Bill that we are hoping to pass today. I beg to move.

My Lords, I was not present at this weekend’s negotiations, so I rely upon the reporting in farming publications and on the BBC for what took place. My understanding is that, as a result of those negotiations, it was agreed that an order was necessary to cover the issues that had arisen in the pricing of milk provided by suppliers to processors. We understand that the Government intend to assist in the negotiation of an order similar to the groceries code order which is at the basis of this legislation. I also understand—it was covered liberally in the media—that the farming Minister, Jim Paice, told all and sundry that he would consider whether that order required an adjudicator. We are legislating for an adjudicator in this area and setting out the framework for the adjudicator to operate. As the Competition Commission will now have to amend the order at the basis of this Bill, could it be persuaded, once an order is negotiated, to incorporate this agreed order into the new order that it promulgates? By that simple stroke, we would get an order that covered this area and the adjudicator that the Minister apparently wants. Is that possible?

My Lords, the relationship between this Bill and the groceries supply order is evidently an important one. The noble Lord, Lord Knight, has proposed a technical amendment to ensure that references to the groceries supply order will refer to the order as varied, if that order is subsequently varied. There is no general rule of construction as to whether references to an instrument include references to any future variations of that instrument. This depends on the details of the context and the drafting in each case. In this case, the Government are confident that the current drafting of the Bill would already have the intended effect, which is that references in the Bill to the order include any future variations made under Section 161 of the Enterprise Act. It would not make sense for the adjudicator to exercise his or her enforcement and compliance functions by reference to a version of the order which was different from the version binding the retailers at the relevant time.

As further evidence of this position, perhaps I might also direct the noble Lord towards Clauses 16(4) and 21(5), which contemplate amendments to the groceries supply order. This makes it clear that the references to the groceries supply order are also meant to include any future variations in this case.

I will now turn briefly to the other issue which the noble Lord has raised and on which I am happy to give him the reassurance he wants. The Government share the natural concerns of noble Lords about the situation of dairy farmers. In light of the obvious interest in this matter, my noble friend Lord Taylor will be making a Written Statement tomorrow. However, I would like to give some reassurance on this issue, although I emphasise that these discussions are not within the remit of the amendment. I have not spoken to Jim Paice over the last few days, but I am sure we will have such discussions in the future. The remit of the groceries code adjudicator is clearly defined and will remain so. The proposed code for dairy is voluntary and any adjudicator for that code would be a separate person.

Our adjudicator will, of course, be able to intervene to address any instances of supermarkets breaching the groceries code in their dealings with their dairy suppliers. Dairy farmers who are indirect suppliers will also be able to bring issues to the attention of the adjudicator, for instance if they believe that an intermediary processor who is being treated unfairly under the code might in turn pass pressure on to them. Colleagues in the Department for Environment, Food and Rural Affairs are deeply concerned about the situation of dairy farmers and are considering a range of ways to help them. We will of course continue to listen carefully to any concerns raised by farmers themselves or by colleagues in government or Parliament. I cannot comment further on the specific points raised by the Minister of State for Agriculture and Food, as these statements were made only recently and he has not yet made any suggestions to me or my department.

However, as noble Lords are aware, pricing is not within the code’s remit, and the noble Lord, Lord Knight, referred to this in his opening remarks. The code addresses contractual relationships between the large retailers and their direct suppliers, not those elsewhere in the supply chain. Concerns in the dairy sector specifically require a different kind of intervention from that provided by the code and adjudicator. That is why Government are seeking swift agreement from the milk industry on a voluntary code of practice for dairy producers specifically.

Colleagues in the Department for Environment, Food and Rural Affairs will be able to provide more details on this important issue, including in the Written Statement to be made by my noble friend Lord Taylor tomorrow. However, I can tell noble Lords that farmers and dairy processors have already agreed the main points of a dairy industry voluntary code of practice on milk contracts. The finer details of this code are expected to be finalised by all parties by the end of August. In addition, the Government are providing direct help for dairy farmers in the form of £5 million additional funding under the rural development programme to increase competitiveness and marketing skills.

The Department for Environment, Food and Rural Affairs will continue to work closely with the industry. Tomorrow, Ministers from that department will be meeting retailers individually to talk about increasing dairy industry sustainability through greater sourcing and promotion of British dairy products. The Government are committed to continuing to work with all parts of the industry to ensure that it has a sustainable, profitable future.

I hope that I have been able to reassure noble Lords that dairy farmers are not being forgotten. Having moved away from the terms of today’s amendment to address these broader points, I reiterate that the Government are confident that the Bill as it stands already achieves implicitly what the amendment would make explicit. References to the order and the code in this Bill can already be understood to mean the order and the code as updated from time to time. I therefore ask the noble Lord, Lord Knight, to withdraw the amendment.

My Lords, I support the Minister’s response. I waited for her comments before I spoke because I was not sure of the exact position now. I tell the noble Lord, Lord Knight, that the negotiations did not take place on Sunday. They took place yesterday. I declare an interest: I was there—not at the negotiations but not far away—and I had a long talk with the Minister, Jim Paice, afterwards and with many of those present who are directly concerned with this issue.

Following the answer given by the Minister, I do not honestly see any need for the noble Lord’s concern or, in fact, the amendment. It would be advisable to wait for the Written Statement due tomorrow because, as my noble friend said, milk will not be left out of this package. Anyone who is appointed to a job as an adjudicator or is concerned with the grocery trade will realise that within it we have a voluntary code of practice that has virtually been agreed by all parties, and which we have been waiting for for some considerable time. Now that the code is there, the dairy trade will inevitably be not only included but prominent in the concern of any adjudicator or in any response that one might have after the appointment of an adjudicator.

I therefore feel confident that there is at the moment no need for the amendment. We should accept the statement made by the Minister here, and we look forward to the further report from the Agriculture Minister tomorrow on the whole situation of the dairy trade.

My Lords, I am grateful to the Minister for her clarifications and to the noble Lord, Lord Plumb, who is never far away from where things are at on these matters and who always speaks with authority on them. I certainly have no wish to interfere with the negotiations or with the voluntary code that is being agreed. I very much applaud the negotiations and the agreements that are coming forward. Clearly, we had a job to do—to scrutinise the Bill—and there was some uncertainty I was looking to be resolved. I am surprised that the Farming Minister did not think it was appropriate to give the Bill Minister in the Lords a call regarding these things because it was fairly obvious these issues might come up today, but that is for the noble Baroness and her colleague to resolve. I think I heard her say correctly from a note that there would be a separate adjudicator if there was to be an adjudicator for the voluntary code. We would subsequently want to explore the efficiency of that arrangement and exactly how it would be drawn up and what status it would have.

We look forward to the Statement from the noble Lord, Lord Taylor of Holbeach, tomorrow. I respectfully ask that some consideration be given as to whether that could be an Oral Statement and not just a Written Statement, because Members of this House may have some questions they would like to be able to ask. Perhaps the noble Baroness could take that back and discuss it with the noble Lord, Lord Taylor, in their office. In the mean time, I am very happy to withdraw my amendment.

Amendment 2 withdrawn.

A privilege amendment was made.

Bill passed and sent to the Commons.