Written evidence submitted by the Association
of Convenience Stores
ACS (the Association of Convenience Stores) welcomes
the opportunity to provide evidence to the Business, Innovation
and Skills Select Committee to support their scrutiny of the draft
Grocery Code Adjudicators Bill.
ACS is the voice of local shops representing 33,500
stores across the UK including well known brands such as the Co-op,
Spar and Costcutter, as well as thousands of independent retailers.
ACS was a main party to the Competition Commission
Inquiry that took place between 2006 and 2008, whose final recommendation
was to create a Grocery Market Ombudsman. Our overarching belief
is that the harmful practices identified by the Commission demonstrate
that the grocery market is failing to work in the interests of
consumers.
The Commission focused on the impact these unfair
practices have on reduced innovation. Yet we would argue that
the harms to consumers extend further than this, for example that
such practices as identified in the Inquiry undermine competition
between different types of grocery retailer and lead to price
based discrimination between different operators in the grocery
supply chain.
ACS has focused this submission on this highlighting
the short comings in the draft Bill in comparison with the Competition
Commission final report and recommendations, published in 2008.
The extensive report and recommendation made by the Competition
Commission provides important evidence giving clear guidance on
the nature of an effective GCA.
ACS is a member of the Grocery Market Action Group
(GMAG) Chaired by Andrew George MP and fully endorses their submission
to the committee.
INVESTIGATIONS
It is our view that the GCA will only be credible
and effective if it has sufficient flexibility to investigate
where there is credible evidence that an abusive practice has
taken place. As it stands section 4 of the Draft Bill provides
too strict a constraint on the proper functioning of the GCA.
It restricts what the GCA can act upon to solely
information provided by "a supplier" or information
that is "publicly available." It is ACS' view that this
restriction will serve to severely undermine the ability of the
GCA to conduct its function and also severely limit the deterrent
factor that the investigative powers should present.
Instead we believe that the Bill should focus not
on the source of the information that the GCA is party to, but
to its quality as evidence of a breach of the Grocery Supplier
Code of Practice.
For this reason we believe that clause 4 (2) should
be replaced with the following text:
"In deciding whether to carry out an investigation
the Adjudicator must be satisfied that there is credible evidence
of a breach of the Grocery Supplier Code of Practice."
This clause, and specifically the term credible evidence
would have to be clearly defined. That definition should provide
for a sufficiently high threshold that it prevented the Adjudicator
from being compelled to act on pure speculation or malicious allegations.
This definition should extend to defining specific
types of evidence, for example:
— Documentary
proof.
— Recordings
of conversations where breaches are discussed or instructions
received.
— Bona
fide financial accounts.
— Investigative
journalism.
It is however not necessary, or desirable, to set
this definitions on the face of the Bill. Rather that it be a
function of the GCA to identify definition for itself under its
Guidance powers contained in clause 13 (1).
These thresholds transparently set and objectively
reviewed, would be the proportionate and flexible means to ensure
the GCA had sufficient opportunity to become aware of and take
action to remedy breaches of the code where they take place.
THIRD PARTY
COMPLAINTS
There is significant concern expressed about the
costly burden that will be imposed on the GCA if the scope of
who can provide information to the GCA is extended beyond suppliers
themselves.
We believe that third party organizations such as
trade associations will be invaluable to the GCS being a success.
The Trade Association is likely to be the only route by which
a supplier would have the confidence to provide information about
activity that breaches the code.
We do not believe that it will be in the interest
of trade associations or other third parties for the GCA to be
distracted and waste resource on frivolous or unsubstantiated
investigations.
However if a third party comes into possession of
evidence that demonstrates a action that is in breach of the code
it is useful and constructive for that to be provided to the GCA.
PROTECTING ANONYMITY
In order to protect suppliers/growers from victimization
and reprisals from the supermarkets during and after an allegation/investigation
process it should be a duty of the Adjudicator to protect the
anonymity of complainants providing evidence. Without this
protection in place it is unlikely that many complaints will be
made the adjudicator for fear of losing contracts.
POWER TO
LEVY FINES
The most effective deterrent will be the reputational
damage caused to offending supermarkets by public "naming
and shaming". However, it is important that the Adjudicator
is able to levy fines as an important part of the "naming
and shaming" process.
There are other examples of regulators that can name
and shame companies but because they do not have fine raising
powers they are not seen as substantial. This can mean that the
Adjudicators judgments do not receive media profile. This cycle
would ultimately undermine the GCA's reputation and the impact
on the behaviour of the retailers subject of the code.
CONCLUSION
The slow progress towards putting a regulator in
place for the grocer sector presents a serious risk to consumer
interests. The Committee has the opportunity to improve the Bill
and to give it momentum.
The GCA needs to be proactive, operationally independent
and report regularly on areas of bad practice.
In order for the GCA to have a real effect on suppliers'
changes the power must exist to levy fines that are large enough
to deter retailers. Without fines we fear that "naming and
shaming" won't work as the GCA is seen as toothless and irrelevant.
Above all the Committee must remove the shackles
and allow the GCA to remit to investigate abuses no matter from
where they get the information that a breach is taking place.
16 June 2011
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