Previous SectionIndexHome Page

The Minister for Energy (Malcolm Wicks): May I congratulate my hon. Friend the Member for Leicester, East (Keith Vaz) on securing parliamentary time—probably more than he anticipated—for this important debate. I am glad to have an opportunity to discuss the issues that he raised. As he acknowledged, the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Bradford, South (Mr. Sutcliffe), who has ministerial responsibility for these matters, has duties in Brussels, so I have been asked to respond to the debate. My hon. Friend apologises for the fact that he cannot be here, but he discussed these matters with my hon. Friend the Member for Leicester, East this morning, and I am sure that he will look at the record very carefully to see what the hon. Gentleman and other hon. Members have said.

The UK competition framework established the Office of Fair Trading and the Competition Commission as independent statutory bodies. The Government wished to remove politics from competition decisions, allowing expert independent competition bodies to make decisions on mergers and markets. Hon. Members on both sides of the House will recognise the benefits of that revised structure. The supermarket code of practice is part of the statutory undertakings given to the Secretary of State for Trade and Industry under section 88(2) of the Fair Trading Act 1973 after a Competition Commission report on the matter was published in October 2000. The monitoring and enforcement of the code is the responsibility of the OFT. In addition to the code of practice, supermarkets are subject to other regulations monitored and enforced by, among others, the Health and Safety Executive, the Food Standards Agency, Her Majesty's Revenue and Customs and local authorities. Any anti-competitive practices fall under the remit of the OFT.

David Taylor: The Minister referred to the range of powers given to the Competition Commission. What social and environmental considerations can the commission take into account when deciding whether or not certain market practices are in the interests of the British consumer?

Malcolm Wicks: I hope to say a more about the Competition Commission a little later. If my hon. Friend does not think that I have addressed those issues, I am sure that my hon. Friend the Under-Secretary will write to him.
7 Dec 2005 : Column 968

We need to see this debate partly in the context of the Government's determination to achieve better regulation in Britain. There is always a tension between understandable demands from hon. Members for more regulation and a more generic concern that British business should not be over-regulated. Given that supermarkets are already subject to independent regulators in a number of areas, and given the importance, which I have just highlighted, of not over-regulating any sector of the economy, the Government do not think that there is any case for the creation of a supermarket ombudsman or regulator. I accept, however, that discussion will continue. I have been warned not to make a quip, but as Minister for Energy I deal with Ofgem, so it would be fun to establish "Off-trolley". Perhaps that will have to wait for another occasion, as I am arguing that the Government do not think that there is any case for an off-the-trolley regulator.

We do not accept that a new supermarket regulator would add any value without duplicating regulatory processes and imposing increased burdens, not only on supermarkets but on the companies that supply them. It would wrong to regulate in that way, and the Government would set a dangerous precedent if we created a regulator to oversee contracts between businesses. Unless unfair, anti-competitive or illegal practices are taking place there is no place for interference from regulatory bodies. British businesses would lose any competitive advantage over their competitors and the country as a whole would be poorer for it. I will deal later with the current state of play.

Mr. Breed : I recognise that better regulation is the way forward. Does the Minister accept that the OFT regulations do not take a wide enough purview of all the issues that have been raised this evening and of the fact that competition must act in the best interests of present and future consumers?

Malcolm Wicks: I am sure that OFT officials will read the record of the debate very carefully.

The major concern with the current code is that suppliers will not make complaints to the OFT for fear that such action would limit their ability to secure contracts with other supermarkets. I have listened carefully to that concern. Farmers and suppliers have indicated that they would be more likely to make formal complaints to the OFT if the OFT could guarantee anonymity for complainants. However, any complaint system will require the supermarkets to be made aware of the details of the complaint. An ombudsman or independent regulator would normally need to share complaints with operators, so that the circumstances and legitimacy of the allegations could be verified and the complaint addressed. Clearly, there are some difficulties here.

The code has a disputes process which incorporates the recognised ombudsman model. Introducing anonymity to the complaints process under the code would run counter to one of the code's main objectives—to put relations between supermarkets and their suppliers on a clearer and more predictable basis. In pursuit of that objective, the OFT has encouraged supermarkets to put more of their dealings with suppliers in writing. Of course, suppliers have a right
7 Dec 2005 : Column 969
under the code to seek terms of business offered by supermarkets to suppliers in writing. That should help suppliers to be more assertive in their dealings with supermarkets. We welcome the OFT's commitment to continue to monitor the operation of the code proactively. That is to be achieved through a number of measures, including encouraging greater use of written terms between suppliers and supermarkets.

Keith Vaz: That is an example showing how debates such as this can get the Government to make a statement on these matters. Does the Minister agree that the OFT has been weak in dealing with that aspect? We welcome the change of heart. Will he address suppliers' fear of coming out with the information and the evidence? There is anecdotal evidence, but nobody wants to come up front because of the fear that they will lose business.

Malcolm Wicks: That has been a powerful theme of my hon. Friend's remarks. Notwithstanding what I have said about that and about the difficulty of considering complaints in a transparent way and the consequent need to know more about the complaint and the complainant, I know that my hon. Friend the Under-Secretary will reflect on what my hon. Friend the Member for Leicester, East has said.

The Office of Fair Trading is committed to checking the supermarkets regularly for compliance and, most importantly, checking how suppliers who raise code issues are treated by the supermarkets afterwards. By monitoring in that way, the OFT can ensure that they are not be subject to any discrimination or sanctions. We are aware of the concerns of some sectors of the supermarket supply chain. The Government agree that supermarkets should deal fairly with suppliers, and we want to see good working relations between them.

My ministerial colleagues and I remain keen to encourage dialogue between supermarkets and suppliers to ensure fair and effective resolutions to disputes. Suppliers are encouraged to approach the OFT at any time to discuss any concerns that they may have in confidence. We may need to publicise that possibility more. The OFT will investigate any complaints that it receives and take appropriate action where necessary. The OFT has not yet received any substantiated claims of breaches. It cannot be expected to take action based on unsubstantiated claims, as such action would seriously undermine the credibility of the code.

I appreciate that another matter of concern to my hon. Friend are the moves by some of the supermarket chains, in particular Tesco and Sainsbury, into the convenience store sector. According to figures from the Institute for Grocery Distribution, published in May this year, Tesco and Sainsbury currently have a small share—11 per cent.—of convenience retailing. We can debate how small or large a share that is. The merger control regime takes into account whether there is a substantial lessening of competition in any merger situation, in which case the OFT has the power to refer the case to the Competition Commission for further analysis. That was not found to be the situation regarding the Tesco-Adminstore or Sainsbury's-Bells acquisitions.
7 Dec 2005 : Column 970

There has been some consolidation in the convenience store sector, but a number of successful independent groups have managed to take on and compete with the multiples. Institute for Grocery Distribution figures predict that symbol groups such as Spar, Costcutter and Londis will increase sales from £8.7 billion in 2006 to £11.6 billion in 2010 and that the number of convenience stores will increase from 12,693 to 13,865. Following an appeal by the Association of Convenience Stores to the competition appeals tribunal—my hon. Friend the Member for Leicester, East mentioned the tribunal—the OFT is reviewing afresh its decision not to refer the grocery market to the Competition Commission. The CAT has asked for that to be done as quickly as possible, and in the circumstances the OFT should be left to complete its work unimpeded.

My Department has received a large amount of correspondence in relation to the so-called "Tescopoly" campaign instigated by Friends of the Earth. I do not want to do any more than note the points made in that campaign, because of the work that the OFT is now undertaking on the grocery market. I expect the OFT to come up with a view on the state of competition in that market and on whether the market is working well for consumers in the context of its new decision whether to make a market investigation reference.

Next Section IndexHome Page