Written evidence submitted by the Food
and Drink Federation
1. This submission is made by the Food and Drink
Federation (FDF), the trade association for food and drink manufacturing.
Food and drink is the largest manufacturing sector in the UK (about
15% of total manufacturing output) turning over £72.3 billion
per annum, creating GVA of around £20 billion. FDF represents
manufacturers of all sizes although 68% of our membership falls
into the small to medium sized enterprise (SME) bracket. SMEs
are the backbone of the food and drink industry and where much
of the innovation and hence growth happens. The creation of a
Groceries Code Adjudicator (GCA) to monitor and enforce the Grocery
Code of Practice (GSCOP) will help to ensure there are no abuses
of market power, so that SMEs have the confidence to invest.
2. After years of Competition Commission market
enquiries, reports and proposed remedies, suppliers should wait
no longer for a much needed GCA. FDF therefore welcomes the publication
of a draft Bill which brings us one step closer to the introduction
of an Adjudicator. But there must be no further delays in establishing
the body which could still take another 12-18 months. We are also
concerned that the draft Bill must be strengthened to ensure the
GSCOP is enforced effectively and any improper use of market power
is identified and dealt with. Two key issues for FDF members are
the need for the Adjudicator to be able to: initiate investigations
on the basis of credible information; and impose financial penalties.
Is there a need for an Adjudicator to enforce
the GSCOP?
3. We adhere to the findings of the Competition
Commission's 2008 report on the UK groceries market, particularly
with regard to the transfer of excessive risk and unexpected costs
by grocery retailers to their suppliers through various supply
chain practices. The report concluded that if these supply chain
practices were left unchecked, they would have an adverse effect
on suppliers' ability to invest and innovate, which could ultimately
reduce choice, availability and value for consumers. The Competition
Commission made a recommendation to establish a body with the
power to gather information following complaints from suppliers
and to proactively investigate breaches of the GSCOP. The recent
challenging economic climate for businesses and consumers, and
the volatility and underlying upward pressure on commodity prices,
make it all the more important that the supply chain operates
and is seen to operate fairly and in the best long-term interests
of consumers.
4. We are aware that some seek to argue that
a lack of complaints since the GSCOP has come into force means
that there are no issues for an Adjudicator to address. On the
contrary we believe that this demonstrates that the GSCOP will
only work fully if there is a proactive Adjudicator in place to
police it, enforcing its terms through access to credible information
on abuses of market power.
Are the draft Bill's provisions relating to investigations
and recovery of investigation costs by the Adjudicator sufficient
and appropriate?
5. No, we do not consider the draft Bill's provisions
relating to investigations to be sufficient to ensure the GCA
is able to effectively gather evidence and conduct investigations
into what appears to be systematic behaviour contrary to the letter
or spirit of the Code. Many suppliers will not have the confidence
to come forward to complain to the Adjudicator despite promises
of anonymity to protect complainants. It is therefore vital for
the Adjudicator to be able to initiate investigations on the basis
of credible information about potential breaches of the Code.
We believe that such credible sources of information could be
tightly defined to bodies such as trade associations which exist
to represent companies and are well placed to provide anonymised
market information. The draft Bill should therefore allow for
three ways in which the Adjudicator may consider whether
to carry out an investigation:
(a) information provided by a supplier;
(b) information that is publicly available; and
(c) information from a credible source ie trade
association representing suppliers.
6. By having three different sources of information
available to initiate an investigation, it will be difficult for
retailers to identify suppliers through the process of deduction
which in turn will give suppliers more confidence. If the Adjudicator
is to be successful then suppliers must have confidence and trust
in the system. Trade associations such as FDF could play a key
role in providing confidence and trust to suppliers who are afraid
of making a formal complaint. Trade associations are also well
placed to identify systematic abuses of the Code of which individual
companies would be unaware and we believe this could be of significant
assistance to the Adjudicator, who will need to have the ability
to set apart rogue complaints from legitimate ones.
Are the draft Bill's provisions relating to the
Adjudicator's forms of enforcement following an investigation
sufficient and appropriate?
7. No, we do not believe that the Adjudicator's
forms of enforcement such as making recommendations or requiring
a retailer to publish information relating to an investigation
would act as a sufficient deterrent. In particular, our concern
is that name and shame mechanisms tend to be highly transitory
and may not have the desired effect given that their effectiveness
and impact may depend on external factors (eg the wider news agenda).
8. FDF therefore considers the levying of penalties
to be an essential part of the enforcement measures available
to the GCA. Our members believe that financial penalties set at
an appropriate level would be likely to have a significant deterrent
effect, particularly since they would be subject to greater shareholder
scrutiny and thereby pressure on a company's future behaviour.
Furthermore, any financial penalties imposed could be used to
fund the Adjudicator which could result in lower fees charged
to those retailers who comply with the GSCOP. The Adjudicator
should have the ability to impose financial penalties from the
start of its operation.
15 June 2011
THE UK FOOD AND DRINK MANUFACTURING INDUSTRY
The Food and Drink Federation (FDF) represents the
food and drink manufacturing industry, the largest manufacturing
sector in the UK, employing up to 400,000 people. The industry
has an annual turnover of over £72.3 billion accounting for
15% of the total manufacturing sector. Exports amount to nearly
£11 billion of which 77% goes to EU members. The industry
buys two-thirds of all UK's agricultural produce.
The following Associations are members of the Food
and Drink Federation:
| ABIM | Association of Bakery Ingredient Manufacturers
|
| ACFM | Association of Cereal Food Manufacturers
|
| BCA | British Coffee Association
|
| BOBMA | British Oats and Barley Millers Association
|
| BSIA | British Starch Industry Association
|
| CIMA | Cereal Ingredient Manufacturers' Association
|
| EMMA | European Malt Product Manufacturers' Association
|
| FA | Food Association |
| FOB | Federation of Bakers |
| FPA | Food Processors' Association
|
| GPA | General Products Association
|
| MSA | Margarine and Spreads Association
|
| SB | Sugar Bureau |
| SMA | Salt Manufacturers' Association
|
| SNACMA | Snack, Nut and Crisp Manufacturers' Association
|
| SPA | Soya Protein Association
|
| SSA | Seasoning and Spice Association
|
| UKAMBY | UK Association of Manufacturers of Bakers' Yeast
|
| UKHIA | UK Herbal Infusions Association
|
| UKTC | UK Tea Council |
Within FDF there are the following sectoral organisations:
| BCCC | Biscuit, Cake, Chocolate and Confectionery Group
|
| FF | Frozen Food Group |
| MG | Meat Group |
| ORG | Organic Food and Drink Manufacturers' Group
|
| SG | Seafood Group |
| VEG | Vegetarian and Meat Free Industry Group
|
| YOG | Yoghurt and Chilled Dessert Group
|
| 
