Supplementary written evidence submitted
by Sainsbury's
I am grateful for the opportunity to address the
Committee on 23 June to provide evidence on behalf of Sainsbury's
to the Committee's inquiry into the Groceries Code Adjudicator.
As requested, please find at Annex A an estimate of Sainsbury's
cost of compliance with GSCOP to date.
We have noted with interest, the evidence from other
witnesses and the position of the Environment Food and Rural Affairs
(EFRA) Select Committee. I wanted to share Sainsbury's views on
some of the key points raised by that Committee and in the other
evidence sessions, which supplements our previous submission to
you. These are in Annex B.
Tim Fallowfield
Company Secretary & Corporate Services
Director
6 July 2011
Annex A
SAINSBURY'S ESTIMATED COST OF COMPLIANCE
WITH GSCOP
GSCOP SET UP
COSTS (May 2009-4 Feb 2010)
— Estimated
at approximately £2 million. Including:
— Sainsbury's
project team costs.
— Sainsbury's
colleague training.
— External
legal advice.
[Note: the Impact Assessment accompanying the Groceries
(Supply Chain Practices) Market Investigation Order 2009 estimated
set-up costs at approximately £0.1 million per retailer (or
£1 million across all 10 GSCOP retailers).]
GSCOP ONGOING ANNUAL
COSTS
— Estimated
at appropriately £0.2 million. Including:
— External
Legal Advice.
— Monthly
training of Sainsbury's colleagues.
— GSCOP
lawyer for day to day advice and disputes management.
— Management
oversight and input.
— Preparation
of compliance Report to the OFT via internal Audit.
[Note: the Impact Assessment estimated ongoing individual
retailer costs at £0.17 million per annum (or £1.7 million
across all 10 GSCOP retailers).]
Annex B
ADDITIONAL WRITTEN EVIDENCE FROM SAINSBURY'S
PROACTIVE INVESTIGATIONS
1. The EFRA Select Committee calls for the Adjudicator
to have the power to undertake proactive investigations, suggesting
that "such an approach might be of particular benefit
when considering generic issues in the supply chain rather than
the relationship between a retailer and an individual supplier".
2. We agree with the Government that the sole
purpose of the Adjudicator should be to oversee and enforce the
Groceries Supply Code of Practice. In this regard, the Adjudicator
should only be guided by specific complaints it receives
about an alleged direct breach of the Code. It should therefore
be reactive and not proactive in seeking to investigate matters
outside the scope of a GSCOP-specific complaint.
3. The Adjudicator must not get involved in any
other aspect of the commercial relationship between retailers
and their suppliers, for example, on prices and costs, which are
outside the scope of the Code and should therefore be outside
the remit of the Adjudicator. To provide the Adjudicator with
proactive generic investigative powers, as envisaged by some witnesses,
risks undermining the powers in existing legislation such as the
Competition Act. Market investigations are, and should remain,
completely separate from the Code.
4. Furthermore, proactive investigative powers
are likely to leave the Adjudicator more susceptible to external
pressures, regulatory creep and, as highlighted by Professor Lyons[21]
(one of the members of the Competition Commission) to the Adjudicator
finding a role to "proactively" represent the interests
of suppliers. If proactive investigations were permitted, the
burden and costs on the Adjudicator and retailers would escalate
markedly (and with less resource available for those specific
matters the Adjudicator was intended to address).
"THIRD PARTY"
COMPLAINTS
5. We agree with the Government that it is not
necessary for representative bodies or other special interest
groups to be able to make complaints on suppliers' behalf. Suppliers
already have the full protection of the widened and strengthened
Code and the knowledge that the Adjudicator will investigate the
case on their behalf. In addition, the draft Bill provides for
the Adjudicator to receive anonymous complaints, negating any
need to filter complaints through third party groups.
6. As outlined above, investigations should only
be initiated in response to a specific complaint about an alleged
direct breach of the Code. Third party groups and trade bodies
would add an additional layer of bureaucracy and are unlikely
to have access to specific details of the contractual relationship
between the retailer and the supplier to be able to comment sufficiently
on the alleged breach.
7. The best approach for all parties, in terms
of speed and accuracy of response, and delivering a more effective
outcome for affected suppliers via an arbitration award, is for
complainants to raise issues directly with retailers using the
mechanisms and protections set out in the Code.
21 Paragraph 11.347 of the Competition Commission's
Market investigation into the supply of groceries in the UK (April
2008) Back
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