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Mr. Chope: Does the hon. Gentleman believe-it is not clear from his Bill-that a complainant should be able to complain to the ombudsman and remain anonymous? The supermarkets have said that that would be a grave breach of natural justice. What is his position on the matter?

Albert Owen: I certainly do not agree that it would be against natural justice. A supplier-perhaps a sole trader-who has a long-term contract with a supermarket and depends on it for his or her livelihood might find that the supermarket had retrospectively changed the conditions of the contract. In taking the complaint to the ombudsman, that person should have some cover whereby the facts can be presented, the contract can be produced, and the outcome can be arrived at transparently. They should have the benefit of not being named, because their livelihoods depend on it. I am sure that the hon. Gentleman supports sole traders and small businesses. The Competition Commission recommended, in the interests of fairness, that they should be added to the ombudsman's responsibilities.

Mr. Dismore: Surely the real issue is the inequality of arms between a small supplier and a mega-multinational supermarket. The supermarket is of course entitled to know the case that it has to meet, but that does not necessitate the identification of the individual who has made the complaint, who could be eaten up alive by the giant power of the supermarkets. What is important is that the supermarkets know the case that they have to make-the gist of the case, as we say in other aspects of the law that we debated earlier this week.

Albert Owen: My hon. Friend is an accomplished lawyer, and he understands these things far better than I do. That concern is not covered in the Bill, but there is no hidden agenda. The intent is to help and support the small supplier and small trader overcome the existing imbalance in the grocery market. He is absolutely right about that.

Andrew George: The hon. Gentleman is making an important point. Further to the anonymity of complainants, it is more important to emphasise that the ombudsman should be able to undertake investigations on a proactive basis, because even if a complainant were to act anonymously, it would be pretty clear, at a very early stage of the investigation, where the original complaint might have come from. When the OFT undertook an inquiry into the effectiveness of the supermarket code of practice published in February 2004, it found that suppliers would not complain because of what they described as a climate of fear about the consequences should they use the remedy available to them.

Albert Owen: The hon. Gentleman is absolutely right. Let us not forget that the inquiry undertaken by the Competition Commission took some two years and included cases and evidence from a wide range of bodies, and its conclusion was that the ability to make anonymous complaints was required by some small businesses. There is no hidden agenda in the Bill. We cannot put everything in it, but the intent is as I am outlining. Clause 1(3) sets out the purpose of the ombudsman, which is to

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It is therefore clear what the Bill is intended to do. It has widespread support, and I believe that we should move forward and establish an ombudsman as soon as it is practical to do so.

Clause 1(4) calls for the ombudsman to be independent of the OFT. There has been some debate about that, and I fully understand why, but to me, an independent ombudsman is one that will investigate and make a determination on conduct allegedly in breach of the code thoroughly and objectively, without outside interference. It will have to build up trust and be easy to access by suppliers, retailers or the OFT itself. It is important that it be independent, and seen to be independent, in dealing with the complaints brought by those three groups and bodies.

Philip Davies: I understand the hon. Gentleman's point, but can he explain how on the one hand he is asking the OFT to establish the ombudsman, and on the other saying that it should be independent of the OFT? How on earth can it be independent of the OFT if it has been appointed by it?

Albert Owen: The answer is quite easy-we lay down the principles and allow the ombudsman to get on with its work, listen to complaints and act on the evidence that it is given. It is very simple. Parliament sets up many independent bodies and accepts their findings, so I do not see a conflict.

John Penrose: This is potentially a point of contention, but it is one of detail and does not undermine my party's basic principled support for the idea of an ombudsman, which the hon. Gentleman has mentioned. It seems possible to argue that an ombudsman within the OFT would be a good deal cheaper, because it would avoid duplication while having all the same powers as the ombudsman that he proposes. I hope he accepts that the OFT itself is independent and has all the determination and resolution that he wants in his independent ombudsman. I am not sure why having an independent ombudsman independent of an independent OFT is necessarily an advantage over having the ombudsman within the OFT itself. Perhaps he could explain.

Albert Owen: I can explain my position, but I am uncertain of the Conservatives' position given what the hon. Gentleman has just said. My understanding is that they want an independent ombudsman within the OFT, and that is what I am saying. I think we are at one on that. The issue is not whether it is housed within the OFT, although there is a debate to be had about that in Committee if the Bill progresses. What is important is that it carries out its duties fairly and transparently, and that all sectors-the OFT itself, retailers and suppliers-have confidence in it.

I agree with the hon. Gentleman, because I do not want to set up an empire-a block of flats with "Ombudsman" on the door, a wide range of suites on
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the fifth floor and so on. I want an effective body that will adhere to its responsibility. I am not really worried whether it is housed in the OFT's building, but I want it to be independent in that it makes its own decisions, so that the code can be applied correctly.

I have to be honest with the hon. Gentleman and say that I do have some concerns about the OFT, which is why we both want to have an ombudsman. If we were 100 per cent. confident in the OFT, we would not be arguing for an ombudsman. The word "independent" makes some people worry that we are going to set up a complete independent body, but whether that is necessary is a matter for debate. We need to establish the principle that we all share and ensure that the ombudsman does its job effectively.

Philip Davies: The hon. Gentleman says that he does not want to set up a great empire, which I am sure is a great relief to everybody, but clause 1(5) states:

That seems a pretty wide-ranging ability for him to appoint as many people as he wants, in order to create such an empire.

Albert Owen: Again, the hon. Gentleman tries very hard to drag this down, but he is not succeeding. If he is suggesting that the ombudsman could do the job on his own, handling a flood of complaints from retailers, suppliers and the OFT, he needs to consider the matter more seriously. There need to be certain resources, but whether there could be economies of scale, perhaps through joint use of IT equipment and so on with the OFT, can be debated if the Bill proceeds into Committee.

Andrew George: The exchange about the ombudsman's independence was particularly helpful, because the extent of that will clearly be an issue for detailed debate. It is encouraging that, as I understand it, we all agree that the ombudsman must not be able to be overruled by the director general of the OFT. If there are ways of saving costs by bringing the ombudsman under the same roof as the OFT, with the same front-of-house facilities, or other ways of avoiding loading additional costs on those who are paying for the service, we should consider them. We are all moving in the same direction-we believe fundamentally that the ombudsman should not be overruled by the OFT.

Albert Owen: The hon. Gentleman eloquently makes my point for me. That is what we agree about-there is more agreement than disagreement between all the parties about the need for an independent ombudsman. However, the hon. Member for Weston-super-Mare (John Penrose) made the valuable point that the details are a matter for debate, which we should have in Committee to tighten up the Bill and ensure that we are all singing off the same hymn sheet.

It is important that the independent ombudsman has real teeth to do its job, so that it can build trust. If it were seen as just part of the OFT, perhaps retailers and small suppliers would not have the faith to go to it. They might feel that the OFT was an arm of government, with its director general making the decisions. That is why we want to establish an independent ombudsman.

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Many of the Bill's clauses are technical, and there were many points that I would have liked to put into it but could not. However, I have explained that the need for the ombudsman has come from the Competition Commission, not from vested interests. The commission has examined the matter thoroughly. The hon. Gentleman said that the OFT could set it up, and I think we can all agree about that, because the OFT is set up in such a way that it can deal with competition issues, but the ombudsman's independence is crucial.

The Bill has cross-party support, and I have talked to a number of Members about it. Its sponsors come from all parts of the House, which is important. The debate outside has also been useful. Yesterday there was a reception hosted by the Grocery Market Action Group, and many organisations were there. I would have liked more dialogue with the supermarkets, but some of them made their views clear in statements to the press. There are divisions between them, and the ones that have already accepted the code, as they will have to, have nothing to fear from a referee or an ombudsman. I make that point time and time again. If we have the fairness and firmness of an ombudsman, we can all benefit. So I welcome the Government's moves in response to the Competition Commission's report, and I believe that the Bill can help and be a vehicle for creating the post of ombudsman in law.

We all value this country's food industry-its diversity and strengths. The small and the not-so-small organisations throughout the supply chain-producers, suppliers and retailers-are important to us, and they need each other to survive. The Competition Commission held an extensive inquiry and concluded that there are market failings. A voluntary code has not delivered fairness for suppliers or consumers.

The new code of practice has been in place since 4 January to ensure fairness and reduce the risk to suppliers that many hon. Members identified in their interventions. If we reduce the risk to suppliers, we allow them to invest for the long term, which allows for innovation, better quality products, more variety and more choice for the consumer. To ensure that the policy and the code work, we need the ombudsman. I hope that the House will accept that today. If I catch your eye, Mr. Deputy Speaker, I would like to comment on others' remarks later.

10.11 am

Andrew George (St. Ives) (LD): I support the Bill, on which I congratulate the hon. Member for Ynys Môn (Albert Owen). As a sponsor, the most helpful thing I can do is not take too much time on a Friday morning. Having engaged in debates on the issue on several previous occasions, I refer hon. Members to my remarks in those debates.

Today is St. Piran's day-Cornwall's patron saint's day. For a Cornishman to be away from the country of Cornwall and up here in England's capital city of London shows my commitment to the Bill. To be here on St. Piran's day shows commitment above and beyond the normal call of duty for a Cornishman. I am missing out on many processions and celebrations in Cornwall in order to demonstrate my support for the excellent measure.

I am pleased that we have the Bill after so much work over so many years by many organisations from diverse
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backgrounds and interests. In the Grocery Market Action Group, organisations such as Traidcraft, ActionAid and Friends of the Earth work co-operatively in the same room with the National Farmers Union and the British Brands Group. That demonstrates the breadth of interest and concern that has brought people together to seek fundamental fair dealing.

Those who are involved in the proposals have never argued that the supermarkets' actions are in some way evil and that they must be stopped. Their behaviour in the past couple of decades has been entirely rational in the context of the market. It is rational for them to use their power in the marketplace to drive the hardest bargain that they can to sustain the highest possible share price and dividend for their shareholders. They are in competition with their few rivals, and that is how they must judge their success as companies.

However, those who are concerned and come from constituencies such as mine, where many small suppliers-small growers, small farmers, fishermen and others-supply the supermarket chains, ask when effective, successful, clever, even creative use of market muscle becomes abuse. Buyers' impact on the suppliers and what has been going on behind the scenes has been investigated and considered for many years. Those of us who have been involved and concerned about the matter have urged the Competition Commission and the Office of Fair Trading over the past 10 years to acknowledge that rather questionable practices have occurred. Those practices are in the interests neither of suppliers who wish to innovate, nor of consumers, who want a good range of products at competitive prices in the shops.

Philip Davies rose-

Andrew George: I emphasise to the hon. Gentleman before he intervenes that the Competition Commission clearly found in its report evidence of the transfer of excessive risk and unexpected costs, which have an impact on supplier innovation and ultimately on the consumer's best interests.

Philip Davies: The hon. Gentleman paints a picture of supermarkets being supplied exclusively by quaint, small farmers, when-because supermarkets are so big, have so many customers and need so many products-most suppliers tend to be big multinational companies, some of which are bigger than the supermarkets. He talks about supermarkets abusing their market muscle, but why is he so determined to stand up for huge, multinational suppliers when the supermarkets are negotiating with them to try to reduce the price for the consumer?

Andrew George: I am grateful for that intervention. Of course, when there is no evidence of unfair dealing between the suppliers and the supermarkets, there is no case to answer. The ombudsman's ability to investigate the trading practices is a back-stop, so if the hon. Gentleman is right, there will clearly be no case to answer. The Competition Commission investigated the matter more thoroughly than I believe the hon. Gentleman has been able to do, and it has reached clear, balanced conclusions.

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Albert Owen: The hon. Member for Shipley made an important point. However, under the Bill, suppliers and retailers will be able to complain about any injustice. I cannot understand the problem. If he thinks that there is an imbalance, and that huge suppliers are unjust to the retailer, the complaint can be made.

Andrew George: I am grateful for that. The hon. Gentleman is right. I hope that, in Committee and at other stages of the Bill's passage, fair trading working both ways-the boot could be on either foot-will be emphasised. Of course, it is possible that a Cornish potato grower would approach the chief executive of a large supermarket and say, "Here are my potatoes. You're selling them two for the price of one, you're paying and I want the money up front a month in advance. If there's any wastage that damages the good name of my product, or you damage my reputation by not handling my goods properly, after I've delivered them to you in pristine condition, you'll pay a fine. If you don't agree to those terms, I won't supply you." When the boot is on the other foot and the supermarkets wish to complain to the ombudsman that their suppliers are treating them unfairly, the ombudsman should examine both sides of the relationship. However, the Competition Commission's point is that it has found questionable practices working the other way, and that suppliers are being treated unfairly. It has clearly concluded that an ombudsman is needed to uphold the principle of fair dealing, which is why the Bill is vital.

I do not wish to speak for very much longer, but one element of the Bill that needs to be emphasised strongly-I highlighted it in an intervention-is the need for the ombudsman to be able to undertake investigations proactively, as well as on the basis of overt or anonymous complaint. Ultimately, the Bill will benefit not only the market, but consumers, who have a massive interest in the measure.

Supermarkets could also benefit significantly. Those with a turnover of more than £1 billion will be covered by the Bill, and many such supermarkets support it-admittedly, some only conditionally. They should embrace the measure, because at the end of the day, if they have nothing to hide, they have nothing to fear. At the end of each year when the ombudsman reports, what could be better for supermarkets than the ability to say that the ombudsman has investigated them, found that their relationship with their suppliers is positive, and given them a clean bill of health?

John Penrose: I take the hon. Gentleman's point about investigations. It is entirely possible that if the source of an anonymous tip-off needs to be protected, they can be so protected if the ombudsman, the OFT or whoever carries out an investigation discovers the information in the files of a supermarket-that can be an effective way in which to maintain the anonymity of a whistleblower. However, that relates to an earlier discussion, to which we may have to return in Committee, on whether the ombudsman should be part of the OFT, which obviously already has such investigative powers. There is a danger of duplication and heavy-handed intervention, because the powers already exist. We might need to deal with that more detailed point in Committee.

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