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

9  Concluding remarks

Possible extension of the Code

168. The 2006-08 Competition Commission study also looked at supply chain practices not involving retailers. The Impact Assessment explained the Commission's findings:

The original SCOP was designed to govern the relationship between retailers and their direct suppliers, not between intermediaries and primary producers. However, during their investigation, the CC reviewed some complaints from primary producers and found that it was not uncommon for processors and other intermediaries, in discussions with their suppliers (including primary producers), to attribute particular supply chain practices to direct intervention or pressure placed on the processor or intermediary by grocery retailers. The CC was told by grocery retailers that, in many cases, this attribution was incorrect and that the supply chain practices were in fact instigated unilaterally by the processor or intermediary, with no input from the retailer.[139]

169. Andrew Opie of the British Retail Consortium expanded on the large retailers' view:

I think there is a lack of understanding of the influence of retailers generally on the supply chain and primary producers. That extends beyond supply relationships to things like the influence of global markets and traded commodities, for example. So the retailers are very high profile; they are large buyers in the market. Therefore a primary producer tends to think that all of his product and the price that he is getting for his product is influenced by retailers.[140]

170. On the question whether GSCOP should be extended to relations higher up the supply chain, the Department commented:

The Government's current position is that they would want to see evidence that the GSCOP and the Adjudicator's role in enforcing compliance with it at the top level is insufficient. […] One would expect that, if the Adjudicator supports the removal of any adverse practices that transfer cost and risk inappropriately at the top layer, then you also remove the incentive for the direct supplier to pass that down the chain. […] [The Government] wants to see evidence that that does not work-it ought to work-before considering extending the Code.[141]

171. Fairtrade Foundation favoured an extension of the Code to the entire UK supply chain, while recognising that the Competition Commission (on the back of the incomplete evidence) had recommended only future consideration of such a move.[142] Importantly, however, Waitrose took the view in oral evidence that even without any extension of GSCOP an Adjudicator could improve matters further up the supply chain because indirect suppliers would for the first time have a right to draw attention to problems under GSCOP which at present they do not have at all.[143] Other bodies such as the Food and Drink Federation,[144] Dairy UK[145] and the NFU[146] were in similar vein content to wait and see how adjudication of GSCOP works before any extension of the Code more broadly, not least because of the possibility of regulatory creep.

172. The evidence we received suggested that it would be premature to extend the GSCOP to relations other than directly with retailers and that the GSCOP in its present form, duly enforced and administered by an Adjudicator, might well bring benefits to other elements of the supply chain. However, we believe that this area should be closely monitored as we suspect that large retailers may to some extent have been taking the blame for the practices of certain processors and intermediaries.

Should the Adjudicator distinguish between different sizes of supplier?

173. A number of bodies argued in favour of restricting the size of supplier that could complain to the Adjudicator.[147]

174. The Minister told us that he did not think this an appropriate course of action:

I think you would get yourselves into a lot of problems and indeed the Competition Commission did not recommend it—if you were to limit the scope of the GSCOP and the GCA just to small producers and suppliers. I think that would be unnecessarily complicated. You may well be right that some of the big suppliers can take care of themselves, but I think if we had tried to somehow arbitrarily find some boundary between small suppliers and large suppliers, we would have tied ourselves up in knots.[148]

175. The British Brands Group took a similar view:

The Competition Commission considered that it would be difficult to draw a line between large and small suppliers. It concluded that such an approach would be impractical:

-  the GSCOP applies to suppliers of all sizes so its monitoring and enforcement should too;

-  the Adjudicator is the gateway to the dispute resolution procedure; with no access to the [Adjudicator], large suppliers [would] only have the courts for redress;

-  the Adjudicator's role will be significantly more difficult if evidence from large suppliers on retailers' compliance cannot be taken into account;

-  larger suppliers may be better able to bring widespread potential breaches of the GSCOP to the adjudicator's attention than small suppliers;

-  to exclude large suppliers would run counter to the interests of consumers. Large suppliers impact far more consumers than small suppliers.[149]

176. Although we are sceptical whether large suppliers will need the protection of the Adjudicator, we accept that in practical terms it would be difficult to draw a justifiable distinction between classes of supplier. Given that many larger suppliers will generally have the negotiating power to look after themselves, however, we expect that the Adjudicator will wish to prioritise cases from smaller suppliers.

Plain English drafting

177. Before pre-legislative scrutiny, the draft Bill was adjusted to a style of plainer English.[150] The written ministerial statement published on the same day as the Bill says:

    The draft Groceries Code Adjudicator Bill is presented in a way that helps wider understanding of the purpose of the proposed new law and how it would work. This is part of the Government's commitment to increase transparency and accountability of Parliament to the public. The Bill is drafted in simpler language and an explanation is given alongside each part of the legal text.

    It is hoped that this approach will allow those affected by the legislation, Parliamentarians, interested groups and the public to engage more actively in the legislative process and understand the impacts of the Bill, without compromising its legal clarity and force.[151]

178. While we are not entirely convinced that replacing the classic sub-heading "Consequential amendments" by "Will this law mean other changes to the law?" represents a great leap forward, other sub-headings were helpfully drafted. We asked what other specific changes had been made in drafting approach and the Department gave the example of Clauses 3(1), 4(1) and 20(5) having been drafted in a more continuous, less fragmented style. We approve of this approach. We also appreciated the approach of reducing the overall number of clauses even if it meant one or two longer provisions.

179. We have one suggestion of our own. The fact that the term "suppliers" as employed in the draft Bill includes both direct and indirect suppliers does not exactly leap up off the page. The actual definition in Clause 23 is, taken alone, overly elaborate. We understand that there might be a wish to retain the connection with the definition of supplier in the GSCOP, but that would not prevent a supplemental provision "for the avoidance of doubt" to clarify that both direct and indirect types of supplier are covered.

Other practical matters

180. We note, in the spirit of co-operation, that there were some respects in which the Department seemed not to have considered the draft Bill's practicalities. Officials had not, for instance, considered whether costs of the Adjudicator would be passed on to consumers.[152] There was also some inconsistency on the right evidence base for assessing overall future compliance.[153] Pre-legislative scrutiny is an opportunity to ensure that such points are not overlooked, and we trust that the process we have undertaken in this inquiry will assist in that, as well as in achieving a workable set of legislative provisions.

Making progress with the Bill

181. The Minister gave us his assessment of the timetable for the introduction of legislation:

We very much hope that we will be able to bring [the draft Bill] to the House after the pre-legislative scrutiny in the second Session of Parliament. I do not want to raise expectations too much, but I still have a glimmer of hope that if the business managers find a little slot in the remaining months of the first Session, we could get it before the House in this first session. I am told the timetable is pretty full up at the moment.[154]

182. This Bill has been some time coming. In order to push matters forward, we have, exceptionally, undertaken the pre-legislative scrutiny stage of the draft Bill in eight weeks rather than the usual twelve, and we trust that the Government will now proceed with legislation speedily.

183. We have suggested a number of areas for amendment to the draft Bill. We expect that the Government will give due consideration to all our suggestions. The truncated timetable we have worked to has meant that we were unable to present all of our recommendations as amendments to the draft Bill. It would be helpful, if the Department, in its response to our Report, could provide us with an outline of how those recommendations could be incorporated into any future legislation.

139   Paragraph 87 Back

140   Q 115 Back

141   Qq 28-29 Back

142   Ev w15 Back

143   Q 228, Dole Back

144   Q 222, Jones Back

145   Ev w13 Back

146   Q 222, Kendall Back

147   See responses to consultation from: Tesco (paragraph 14), Co-op Group (paragraph 24.2, restricted to an argument that anonymity should not extend to large suppliers, and British Retail Consortium (paragraph 21) Back

148   Q 291 Back

149   Ev w8 Back

150   The Department and Parliamentary Counsel were very keen to point out that all legislative drafting is intended to be clear and accessible (Responses to questions at Ev 93, Heading 3, paragraph 9b)) Back

151   24 May 2011 Col 47 WS Back

152   Q 79, Swift Back

153   Q 24 Back

154   Q 284 Back

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Prepared 28 July 2011