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.
Reporting
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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