House of Commons
Friday 5 March 2010
The House met at half-past Nine o'clock
Prayers
The Chairman of Ways and Means took the Chair as Deputy Speaker (Standing Order No. 3).
Mr. Andrew Dismore (Hendon) (Lab): I beg to move, That the House sit in private.
Question put forthwith (Standing Order No. 163).
Grocery Market Ombudsman Bill
9.35 am
Albert Owen (Ynys Môn) (Lab): I beg to move, That the Bill be now read a Second time.
I am delighted to move the Second Reading of this Bill, the principle of which has gathered support from those in all parts of the House since it was introduced in December. It is appropriate that I put on the record my sincere thanks to the Grocery Market Action Group, which consists of a powerful alliance of organisations, including the Association of Convenience Stores, the Rural Shops Alliance, the Independent Fruit Growers Association, the British Brands Group, the National Farmers Union, ActionAid UK, Traidcraft and Banana Link. Many of those organisations have lobbied Members to attend today's debate, and they are very supportive of Members' support for the Bill.
The action group is ably chaired by the hon. Member for St. Ives (Andrew George), and I pay tribute to him for his long-standing campaign to address the imbalance in the grocery market. The group has played a constructive role since it was set up in 2006, when the Competition Commission began its latest inquiry into the retail sector. I thank also the Farmers Union of Wales and, particularly, my local Ynys Môn branch, which has lobbied me for a long time-since I was first elected in 2001, in fact. It has argued in a forthright and coherent manner for a grocery code of practice and an ombudsman to implement the code effectively, and I have led a number of union delegations to meet Ministers in the House, including the Minister with responsibility for food, farming and the environment, my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick), who was very receptive to the idea of an ombudsman. I also acknowledge the farmers unions' dairy industry campaigns to secure a fair price for producers, given what they consider to be market failings. I agree with them and hope that in some way the Bill will address that imbalance, too.
I want to make it clear that I am not anti-supermarket, nor indeed are the terms of the Bill. In fact, I am pro-supermarket. I am also pro-small shops, pro-small convenience shops, pro-local suppliers and, above all, pro-consumer. The supermarkets are the major retailers, and they are important contributors to the local economies of all our constituencies and, indeed, the country's wealth.
David Cairns (Inverclyde) (Lab): I congratulate my hon. Friend on bringing forward his Bill. Will it address the non-grocery products that supermarkets sell? I am thinking, for example, of petrol, whereby the local pricing policy of large grocery retailers leads to a great distortion. In Inverclyde, which has some prosperous areas but also a lot of deprivation, the petrol prices that grocery retailers set are higher than those in many much more prosperous areas of Scotland. I am grateful to a constituent of mine, John MacNeil, who has driven all around Scotland pricing petrol. Will my hon. Friend's Bill address the supermarkets' local pricing policy on that product?
Albert Owen: My hon. Friend makes an important point, and, indeed, I attended a debate about petrol prices in Westminster Hall. It is a big issue, and there are market failings in that area, too. In order to move forward, we need the Office of Fair Trading to undertake an inquiry into petrol pricing. The OFT and the Competition Commission could recommend to the Government a policy on those imbalances, which my hon. Friend has described. They are evident in all our constituencies, and I represent a periphery area, where we face exactly the same problems. Not only are some of the large retailers and supermarkets varying their petrol prices; they are having a huge impact on independent suppliers, many of which have had to close down.
John Penrose (Weston-super-Mare) (Con): I apologise for butting in on the hon. Gentleman so early in his speech, but I want to back up the point that he was making in response to that last intervention. Does he agree that it would be inappropriate to use an ombudsman to stick up for the oil companies, many of which are larger than the supermarkets concerned? There might be an issue of the kind that has just been discussed, but an ombudsman would be the wrong way to deal with it.
Albert Owen: I agree. We are talking about not only the retailers of petrol but the distributors and oil companies. Although we need a fresh independent inquiry into the pricing mechanism, I do not think that this Bill-or, indeed, an ombudsman-is the way forward for that.
Mr. Christopher Chope (Christchurch) (Con): Does the hon. Gentleman accept that there have been many inquiries which have always come down in favour of saying that an active market is operating and that there are additional costs in rural areas that have to be borne by somebody? However, how is petrol retailing associated with groceries? As I understand it, those are what this Bill is about.
Albert Owen: I do not think that the hon. Gentleman was listening to what I said. What he has mentioned is not in the Bill. An important point was raised about the variations in petrol prices across the United Kingdom, and he says that many inquiries have favoured the retailers and the oil companies on the issue. Indeed, in the past there have been many inquiries about the issues raised by my Bill. However, the most recent one came to the conclusion that there were market failings. That is why there is a new code and why we need a new ombudsman. We need an up-to-date inquiry by the Office of Fair Trading into petrol prices.
Mr. Andrew Dismore (Hendon) (Lab): Perhaps I can raise a different point and get my hon. Friend off the petrol issue. I am here to support his Bill, but one of the issues in relation to supermarkets is suppliers from the developing world. Bearing in mind that we are in Fairtrade fortnight, does my hon. Friend consider that his Bill does anything to support developing-world suppliers, which often get a raw deal from supermarkets?
Albert Owen: Yes, indirectly. This is about choice. We are all lobbying and campaigning for greater choice and greater brands, and Fairtrade is an important source of those. The Bill will help. Many of the organisations that lobbied hard for it welcome that, because they believe that it will do something to help them in future.
Philip Davies (Shipley) (Con): Earlier, the hon. Gentleman said that he was pro-consumer and that he saw an imbalance between the power of the supermarkets and that of the suppliers. Presumably, therefore, he wants the appointment of the ombudsman to result in higher payments from supermarkets to suppliers. That would inevitably lead to higher prices for customers. Given that he is so in favour of consumers, will he tell us by how much he expects prices to go up and the kind of rise that he thinks would be acceptable?
Albert Owen: I thank the hon. Gentleman for that intervention. What is involved is not what I say as I develop my argument, but what the Competition Commission says independently.
Philip Davies: No, it's what you're saying.
Albert Owen: I have not even developed the argument, so I could not have said that. What I am saying is that I am pro-supermarket, pro-supplier and pro-consumer. If the hon. Gentleman wants to argue against that, that is up to him, but it is on the basis of that standpoint that I bring the Bill to the House-to make sure that the code is properly applied and adhered to.
Andrew George (St. Ives) (LD): I congratulate the hon. Gentleman on the Bill. May I clarify something? On the requirement for a supermarket ombudsman, the Competition Commission found not, as the hon. Member for Shipley (Philip Davies) suggested, that the mechanism involved should be price sensitive and price setting, but simply that it should oversee the necessity for fair dealing. The issue should not be and is not about price setting.
Albert Owen: The hon. Gentleman is absolutely right. We are talking about fairness. The Competition Commission identified that there was an imbalance and that there were market failings and unfairnesses. The Bill would rectify that. The code has been in place since 4 February; what we are looking for is a referee to oversee it. It is as simple as that.
Mark Williams (Ceredigion) (LD): I congratulate the hon. Gentleman on bringing forward the cause. He will be aware of polling evidence that consumers are very much in favour of the creation of an ombudsman; a YouGov poll identified that eight out of 10 consumers were. Does the Bill not also represent a huge opportunity for supermarkets to present themselves in a positive light?
Albert Owen: I agree, and I thank the hon. Gentleman for all the support that he has given me and for his work with the National Farmers Union and the Grocery Market Action Group to establish the code and make sure that we have the inquiry. I will develop my argument and deal with the issue in greater detail.
Mr. Roger Williams (Brecon and Radnorshire) (LD): I am sure that the hon. Gentleman will agree with me on a point that he might develop later. The issue is not all about prices; it is about terms of trade as well. I recently discovered a supermarket that tried to increase its credit terms to 90 days. That is an impossible situation for a small supplier, so the matter is about more than price-it is about terms of trade as well.
Albert Owen: It is, and that comes under the umbrella of fairness. As my hon. Friend the Member for Hendon (Mr. Dismore) said, the issue is about fair trade, including Fairtrade suppliers. The whole ambit is covered by what the code will produce, but the Bill is specifically about the ombudsman.
Before I took those interventions, I was praising the supermarkets for their importance in the local and national economy. In the United Kingdom, the food retail sector represents about £110.4 billion. The supermarkets are at the end of the supply chain; at the other end are the producers, farmers and suppliers. I want there to be an interdependency between them all, but at this time that does not exist. That is why we need the new code and an ombudsman as a referee.
As I said, the purpose of the Bill is to institute both fairness and firmness-the fairness that the new code of practice will provide, and the firmness that a referee would bring. That is exactly what a grocery market ombudsman could do in overseeing the grocery supply code of practice, to which I shall refer as "the code" from now on.
I use the term "referee", and there is an important rugby analogy. Like rugby, the grocery market is a rough game. It needs rules and a referee to ensure that they are adhered to on all sides. That is what I argue in the Bill. I share the aim of many in the House that we need a rich diversity of suppliers, producers and brands, and small and large retailers, along with the supermarkets, to provide real choice and real value for the consumer.
The need for the code was established as a result of a full and comprehensive inquiry by the Competition Commission, at the request of the Office of Fair Trading, into the supply of groceries by retailers in the United Kingdom; I stress that the Bill covers the whole of the United Kingdom of Great Britain and Northern Ireland. The inquiry started in May 2006. After two long years, the commission reported in April 2008. Its findings made it very clear that there was an adverse effect on competition and it provided remedies to rectify those market failings.
Philip Davies: The hon. Gentleman says that the Competition Commission's report was very clear. However, does he concede that the economist Professor Bruce Lyons, one of the two Competition Commission panel members working on supplier issues, concluded that the ombudsman would be counter-productive? He opposed the setting up of an ombudsman.
Albert Owen: I am grateful to the hon. Gentleman for that intervention. I said that the report was clear; I did not say that it was unanimous. There was a lone voice, and the hon. Gentleman is desperate to jump to it. There was, however, a huge majority in favour of establishing the code and the ombudsman. I see where the hon. Gentleman is coming from, but in a democracy we have to go with the majority. I believe that he is a democrat and I am sure that when I have developed my arguments he will support the Bill because it is about firmness and fairness, and I am sure that he is a decent person who believes in both. It will be difficult for him to argue against that principle.
Paragraphs 2, 3 and 5 of the report's summary were clear that there was an adverse effect on competition. Paragraph 2 states:
"We found that, in many important respects, competition in the UK groceries industry is effective and delivers good outcomes for consumers, but not all is well."
I am sure that the hon. Member for Shipley (Philip Davies) is listening to this first part. The paragraph goes on:
"We have concerns in two principal areas. First, we found that several grocery retailers have strong positions in a number of local markets. Barriers faced by competing grocery retailers that could otherwise enter these markets mean that consumers get a poorer retail offer in terms of prices, quality and service than would otherwise be the case, while those grocery retailers with strong local market positions earn additional profits due to weak competition in those markets."
"Second, we found 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."
That is why we are battling for consumers as well as for suppliers. The report says, in part 5 of its summary:
"We will be tightening the provisions of the Supermarkets Code of Practice and broadening its application such that more grocery retailers will be required to abide by its terms. We will also be seeking legally binding commitments from grocery retailers to establish an Ombudsman to oversee the revised Code. If we cannot secure suitable undertakings from these grocery retailers, we recommend that Government takes the necessary steps to facilitate the establishment of the Ombudsman."
That is a very clear conclusion by the Competition Commission on this matter.
The commission was also very fair in wanting an undertaking from the retailers to establish, during a reasonable period, the appointment of an ombudsman. However, the voluntary agreement did not deliver that conclusion, and no undertaking was reached for such an office. The commission recommended that the then Department for Business, Enterprise and Regulatory Reform should establish an ombudsman
"to give the Ombudsman the power to levy...penalties on the retailers for non-compliance."
Mr. David Drew (Stroud) (Lab/Co-op): I thank my hon. Friend for introducing this excellent Bill. Does he accept that part of the problem with trying to get a response from the supermarkets is that they are utterly divided? It is a myth to pretend that all supermarkets are opposed to an ombudsman, and that is why we need to legislate on behalf of the good.
Albert Owen: I am grateful to my hon. Friend for highlighting that point; I am sure that other hon. Members will do the same. Some supermarkets have embraced not only the code but an ombudsman, because they believe that that is in their interests as well as in the interests of suppliers and consumers. At the end of the day, we all want to reach the goal of a healthy food industry and grocery industry in Britain.
I have lobbied and campaigned for an ombudsman for an awfully long time. Having somebody independent of Government and the supermarkets making the decisions would have the advantage of giving confidence to suppliers to invest for the long term and take long-term decisions.
My Bill has been the subject of a lot of discussion in the press. I welcome the announcement by the Conservatives that they agree that there have been market failings in the current circumstances and that we should have an independent ombudsman to right that wrong. In January, the Government accepted the need for a body independently to enforce the code of practice. The Minister for Further Education, Skills, Apprenticeships and Consumer Affairs, my hon. Friend the Member for Cardiff, West (Kevin Brennan), announced that the Government accepted the Competition Commission's recommendations and said that a consultation would be undertaken on the new code, which came into force on 4 January 2010- a consultation not on whether we need an ombudsman but on how best that ombudsman should be housed and have the tools to enforce the code. I am very grateful that as we go into the next general election the two major parties support the appointment of an ombudsman, as do all the other parties in this House. I am speaking from a position of strength and consensus in promoting this Bill. It has always been my intention, and that of its sponsors, to create that consensus across the House to ensure that we get the best deal for suppliers and for consumers. I hope that we can move forward on that united front.
Of course, there are those who oppose the Bill, including the British Retail Consortium and, as my hon. Friend the Member for Stroud (Mr. Drew) said, some of the supermarkets are divided on the issue. However, I believe that the momentum is going in its favour and that the supermarkets will find that they have nothing to fear from fairness in the grocery market supply chain.
Mark Williams: The hon. Gentleman has alluded to the British Retail Consortium, which has described his proposal as a new "multi-million pound bureaucracy". It obviously has ramifications in terms of costs. However, the National Farmers Union has said that the cost of the ombudsman would be as minimal as 0.005 per cent. of the turnover of the supermarkets, which amounts to some £70 billion. Given what he is trying to achieve, surely that represents real value for money.
Albert Owen: Yes, I agree with the NFU. I do not agree with the NFU on all issues-in fact, there are some on which I am diametrically opposed to it-but on this one, I have worked with it, and I have seen the figures. An independent analysis of those figures comes to the same conclusion about the costs. I believe that they could be absorbed quite easily. In proposing a code and an ombudsman, we are seeking fairness whereby suppliers can invest for the long term, can display more innovation, and can give more choice to the consumer.
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