Time to bring on the referee? The Government's proposed Adjudicator for the Groceries Code - Business, Innovation and Skills Committee Contents

7  Reporting and accountability

What the draft Bill provides for

140. Clause 15 requires the Adjudicator to prepare an Annual Report including summaries of disputes referred to arbitration under the Groceries Supply Order, investigations and cases of enforcement, and any recommended changes to the Code.

141. Clause 16 provides for a review of the Adjudicator's performance three years after the financial year in which it is set up and then at three year intervals thereafter. Under Clause 17, the Secretary of State will have powers to abolish the Adjudicator if it is found that it has not been effective. Clause 17 also contains power to transfer the Adjudicator's functions elsewhere.


142. Sainsbury's summarised the views of the large retailers and the British Retail Consortium in wanting greater scrutiny of the Adjudicator itself:

We can understand why independence is seen as important but have concerns that there will be few checks and balances on the Adjudicator, apart from the 3-yearly review to be conducted by the Secretary of State. It is not clear to whom the Adjudicator will be accountable, or what action may be possible if there are concerns about the operations of the Adjudicator outside of the 3-yearly reviews. In addition, there is currently no means for the retailers who are funding the new body to comment on its operation outside these reviews. We believe that the draft Bill should be amended to address these gaps in accountability.[112]

143. Waitrose was aligned with the other large retailers on this issue, in particular because of its wish to see a move away from equal share funding[113] as soon as possible:

If this Bill is going to drive behavioural change, it needs to bite. One of the ways that it can bite is by charging people—retailers who are acting inappropriately—the cost of investigating and adjudicating their cases. The way to do that is to spread the fixed costs on a market share basis and then allocate the incremental costs of investigation and adjudication, in proportion to the number of complaints, investigations and the amount of work that those retailers cause. We believe that three years is far too long a wait to do that.[114]

144. Waitrose believed that the Department should conduct any reviews of the Adjudicator, with the costs borne out of the Adjudicator's own operational costs.[115]

145. The Church of England Ethical Investment Advisory Group argued from the opposite corner, and supported five-yearly reviews on the basis that a review after three years would be unlikely to give the Adjudicator long enough to prove its worth.[116] The Rural Shops Alliance also believed that the Adjudicator would take some years to become effective.[117]

146. Addressing the issue of accountability the Minister said:

I think to do it every year would create instability and uncertainty in the system. Three years is sufficient; doing it every year would be pretty bureaucratic and costly. It is unlikely we would go from three to one; there might be pressure to go longer, but I think three yearly reviews is the right balance.[118]

147. We believe that a review after only a year of operation would be disruptive to the development of the Adjudicator's office. On the other hand, and given the concerns we express about funding, we agree with the retailers that three years is too long to leave before taking a first look at a permanent funding model and at expenditure—particularly as the draft Bill defines review periods in a way that could delay first review until nearly four years after inception. We recommend a first review as soon as possible after two full years of operation, consistent with annual review periods ending on 31 March. Thereafter we agree with the Government's proposals for reviews every three years.

Location and staff

148. The Policy Document explained the location, establishment and independence of the Adjudicator:

The Government Response to Consultation announced that the Adjudicator would be based within the Office of Fair Trading but would be established independently from its consumer and competition activities. However, as the Government is now consulting on merging the competition functions of the OFT and Competition Commission to create a single Competition and Markets Authority it is no longer practical to increase the functions of the OFT. Whilst, the Government's overall intention is that the Adjudicator should be part of any new Competition and Markets Authority, in the interim period we have decided that it should be created as a statutory office holder. The intention remains that the Adjudicator should benefit from the skills and expertise of the OFT and this will be achieved through co-locating the Adjudicator within the OFT, resourcing it mainly through secondments from the OFT and sharing its back office functions. The Adjudicator's relationship with the OFT is intended to be on an arm's length terms basis and subject to appropriate safeguards being in place to protect confidentiality and avoid conflicts.[119]

149. In general there was support for situating the Adjudicator physically within, but separate legally from, the Office of Fair Trading, as proposed in the draft Bill. In the 2010 consultation, the law firm Cameron McKenna pointed out:

Suppliers may be unwilling to complain or raise disputes with the OFT concerning any commercial arrangements with grocery retailers as they may be concerned that the OFT may also scrutinise these arrangements under the competition law rules.[120]

150. Waitrose was among a number of bodies who were not entirely content with the Government's proposed location for the Adjudicator but which did not see this an issue worth going to the wall for:

Whilst we would have preferred the body to be absorbed into the OFT, we understand the Government's rationale for creating a body that is independent of the OFT while the UK's competition regime is under review.[121]

151. Most significant in this regard, however, was that the Office of Fair Trading did not seem to believe that it was the most appropriate host for the Adjudicator's office.[122]

152. The National Farmers Union was not happy about the proposed staffing arrangements:

Under […] the draft Bill, the only provision for staffing to support the Adjudicator […] is through secondments from BIS and the OFT. We are concerned that this will undermine the ability of the Adjudicator to fulfil his duties properly, as qualified staff may not be available from this restricted pool […] We believe the Adjudicator should be given much more freedom in recruiting full-time, permanent staff to support him in his work.[123]

153. NFU Scotland suggested that staff from the Department of Environment, Food and Rural Affairs be considered for secondment on the basis that this would add to the relevant knowledge and experience base.[124] Action Aid wanted an open recruitment process based on suitability for the roles.[125]

154. We agree with the Government's proposal for the Adjudicator to be located within the Office of Fair Trading but as a separate body. However, we recommend that the draft Bill be amended to allow secondment on merit from organisations other than just the Department for Business, Innovation and Skills and the Office of Fair Trading.

112   Ev 84; See also Qq 143-145 Back

113   See subsequent section on Funding Back

114   Q 260 Back

115   Q 261 Back

116   Ev w10 Back

117   Q 236, Parsons Back

118   Q 337 Back

119   Paragraph 8.1 Back

120   Response to consultation, page 3 Back

121   Ev 86 Back

122   Response to Consultation, paragraph 11; interestingly, it was also sceptical whether there would be synergies from physical co-existence (see paragraph 8) Back

123   Ev 77 Back

124   Ev w25 Back

125   Ev w5 Back

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Prepared 28 July 2011