Appendix: Government Response
Introduction
The Government thanks the Business, Innovation and
Skills Select Committee for its thorough scrutiny of the draft
Groceries Code Adjudicator Bill. Pre-legislative scrutiny plays
a very important role in assisting the preparatory work on legislation
and informing Parliamentary debate, ultimately leading to better
legislation.
The Government is pleased that the Committee concluded
that a Groceries Code Adjudicator is necessary. It recognises
that our supermarkets serve UK consumers well and make an important
contribution to the economy. The Government intends for the Adjudicator
to have a very specific and defined role to ensure the Groceries
Supply Code of Practice is adhered to. The Government does not
intend for the Adjudicator's role or remit to be extended beyond
what was originally envisaged by the Competition Commission.
Negating the adverse effect on competition identified by the Competition
Commission is the core principle behind establishing a Groceries
Code Adjudicator.
The Government has carefully considered each of the
recommendations made to it by the Committee, and has considered
further information provided to it during the course of the pre-legislative
scrutiny process. The Government has decided to incorporate a
number of the recommendations into the Bill, in particular that
the Adjudicator should have some power to escalate remedies, to
have the first review after two, rather than three, years, and
to extend the source of secondments to the Adjudicator from the
current provision of BIS and the OFT, to the entire public sector.
The Government thanks the Select Committee for these valuable
suggestions which will make the Bill a stronger and better one.
There are a number of other recommendations that
the Government will not be taking forward, in particular to provide
the power to add additional categories of informant in the future,
and introducing financial penalties from the outset. The Government
is still considering whether to allow information from trade associations,
and possibly whistleblowers, to act as a trigger for starting
investigations, though currently its position remains that such
information should not be allowed to trigger investigations. It
recognises that in some of these cases the arguments are finely
balanced, and has set out the reasons why it has chosen not to
accept these specific recommendations below.
Government Response
The Government welcomes the Committee's Report on
its pre-legislative scrutiny of the draft Groceries Code Adjudicator
Bill.
Set out below are the Government's responses to the
Committee's conclusions and recommendations, under the headings
adopted by the Report. These are listed in the order in which
they appear in the Report, with the Government's response set
out below each of them. Where it makes sense to do so, some answers
have been grouped together.
A FURTHER REVIEW BEFORE THE BILL
COMES INTO FORCE?
Although it is not ideal to proceed with legislation
based on evidence obtained largely in the period 2006-08, there
is sufficient additional recent evidence of continuing problems
to support the original data. We therefore reject the need for
an additional review at this time. (Paragraph 46)
The Government welcomes the Committee's conclusion
that there is sufficient evidence to proceed with legislation.
WHETHER TO PROCEED WITH THE BILL
We welcome the substantial investment made by
large retailers to improve compliance with the Code. We also recognise
that supermarkets in the UK continue to provide a highly competitive
offering and hence substantial benefits to consumers. However,
many suppliers still believe that only the establishment of an
Adjudicator will give them the confidence to air their grievances
fully. On the evidence before us, we conclude that there remains
a sufficient level of concern with compliance to justify the creation
of a statutory Adjudicator. Setting up an Adjudicator might also
help address the concerns we heard about the costs of pursuing
legal action for Code infringement. For those reasons, we believe
there that the Government's proposal to introduce a Bill should
be endorsed. (Paragraph 48)
The Government welcomes the Committee's recognition
of both the substantial investment made by the large retailers
to improve compliance with the Groceries Code and the substantial
benefits delivered by the large grocery retailers to UK consumers.
The Government welcomes the Committee's endorsement
of the Government's proposal to introduce a Groceries Code Adjudicator
Bill.
ARBITRATIONS
We conclude that the provisions in the draft Bill
relating to arbitration and potential conflicts of interest of
the Adjudicator are satisfactory and provide the necessary safeguards.
(Paragraph 54)
The Government welcomes the Committee's conclusion
that the draft Bill's provisions relating to arbitration and potential
conflicts of interest are satisfactory and provide the necessary
safeguards.
HOW THE ADJUDICATOR WILL INVESTIGATE
We conclude that it is right for the draft Bill
to include indirect suppliers within the scope of those whose
information can found an investigation under the GSCOP. The Adjudicator
will need to put effective filters in place to guard against irrelevant
or spurious claims, but that should be an expected early objective
in any event. (Paragraph 69)
On balance, we believe that there is a good case
for amending the Bill at least to allow information from trade
associations representing direct and indirect suppliers to trigger
an investigation and possibly from whistleblowers who are employees
or ex-employees of retailers, provided such information still
clearly relates to an alleged GSCOP infringement. This could be
achieved by extending Clause 4(2) to add: "(c) trade associations;
and (d) current or former employees of large retailers."
There is what would appear to be a suitable definition of trade
associations in the Companies Act 2006. (Paragraph 83)
The Government welcomes the Committee's conclusions
that the draft Bill should include the ability for information
provided by indirect suppliers to trigger an investigation under
the Groceries Code.
The Government appreciates the concerns raised by
both the Committee and the large retailers regarding the potential
for this provision to be costly if the Adjudicator's guidance
is not appropriately clear and descriptive. As the Committee recognises,
the publication of such guidance will be an early objective for
the Adjudicator and the effectiveness of this guidance is likely
to be an area the Secretary of State will consider when conducting
reviews.
The Government will consider further the arguments
for extending the remit of information which can trigger an investigation
to that provided by trade associations, and possibly whistleblowers.
Its position at this stage, however, remains that information
provided by trade associations should not be able to be used to
trigger an investigation.
The Government reaffirms its position from the policy
document, '…As these are contractual matters it is likely
that only a direct or indirect supplier would have sufficient
information to make an appropriate complaint. Third parties, trade
associations and non-governmental organisations will still have
a useful role to play in offering advice and assistance to their
stakeholders, but information on which the Adjudicator may base
an investigation must come direct from the business affected'.
In assessing the potential benefits of allowing information
from trade associations to be used as a trigger for starting investigations,
the Government must balance this with the additional risk of procedural
unfairness to retailers which might arise from the Adjudicator
having less direct access to the evidence from the suppliers themselves.
The Government recognises that the Adjudicator will
need to develop the trust and support of the supply chain to ensure
that suppliers have the confidence to come forward. The Government
envisages trade associations and other bodies having an important
role to play in ensuring that the provisions of Clause 19 (i.e.
the Adjudicator's duty to protect the identities of complainant
suppliers) are communicated as quickly and thoroughly as possible.
The Government also notes that any publicly available
reports of trade associations may be considered by the Adjudicator
when deciding whether or not to carry out an investigation. It
will make this clear in the explanatory notes to the Bill. This
would provide a means by which trade associations, through their
ability to collate information from many different members, may
help the Adjudicator to become aware of systematic patterns of
behaviour or breaches of the Code. The Government will also actively
work with trade associations between now and the introduction
of the Bill to identify ways in which they can help to ensure
the Adjudicator is as effective as possible.
With regards to whistleblowers, the Government recognises
that the same issue of procedural unfairness discussed in paragraph
10 does not apply: the Adjudicator would be receiving information
from a named individual who would in most cases be the direct
source of the information provided. Furthermore, the Government
recognises that a whistleblower might have information that related
to a contractual relationship. On the other hand, it is necessary
to balance this against the risk that, especially if the information
could come from former as well as current employees, retailers
could use this strategically to draw the Adjudicator's attention
to their competitors (in the case of an employee moving from one
retailer to another). It is also the case that any rights granted
to whistleblowers under this Bill would need to be compatible
with the existing framework of law governing whistleblowers in
the economy as a whole. The Government will consider this matter
further, taking into account the wider legal framework, before
introducing the Bill.
The draft Bill might usefully be amended to grant
the Secretary of State the power to add additional categories
of informant in future, based on evidence and consultation. (Paragraph
84)
For the reasons given above, the Government also
does not accept the Committee's recommendation that it would be
useful to grant the Secretary of State the power to add additional
categories of informant whose evidence could be used to trigger
an investigation in future.
We believe that the need for the Adjudicator to
act on clear evidence should be made transparent on the face of
the Bill. We recommend that Clause 4(1) be amended to read: "If
the Adjudicator has reasonable grounds, based on evidence, to
suspect that a larger retailer has broken the Groceries Code,
the Adjudicator may carry out an investigation… (continue
as in draft Bill)." (Paragraph 85)
The Government understands the Committee's concern
but considers that this amendment is not necessary. The concept
of reasonable grounds for suspicion is based on precedent, in
particular section 131 Enterprise Act 2002. It is implicit that
the Adjudicator's reasonable grounds will need to be based on
evidence, and it will be for the Adjudicator to consider whether
that evidence is sufficient to justify an investigation. There
is also the risk that an express requirement for evidence here
might imply that evidence is not needed in other legislative cases
where similar language is used. However, the Government does intend
to use the Explanatory Notes to clarify this matter.
We do not believe that the Adjudicator should
be given the power to proactively initiate investigations without
any triggering evidence. That said, the Bill and/or the Explanatory
Notes should make clear that the Bill's provisions do not prevent
the Adjudicator from making contacts that would otherwise be permissible
under the general law. (Paragraph 89)
The Government agrees with the Committee's assertion
that the Adjudicator should not be given the power to proactively
initiate investigations without any triggering evidence. The Explanatory
Notes can be clarified to make clear that the Bill's provisions
do not prevent the Adjudicator from making contacts that would
otherwise be permissible under the general law.
We agree with the Environment, Food and Rural
Affairs Committee and with the Government that confidentiality
for complainants to the Adjudicator is vital. However, the Government,
the Adjudicator and those reviewing the performance and operation
of the Adjudicator should bear in mind the potentially large cost
to retailers of having to respond to anonymised complaints. The
retailers' concern in this area is valid and should be taken strongly
into account in assessing the practicality and fairness of the
regime put in place by the draft Bill. (Paragraph 98)
We acknowledge that investigations into categories
of product rather than specific products carry with them the risk
of increasing costs both to the Adjudicator and to the parties.
The Adjudicator will need to find ways of working to seek to minimise
such effects while recognising that some cost might be inevitable.
It should be remembered that investigations by category might
not necessarily be as artificial as they at first appear: bad
practice in one product area might well be reflected in a closely
related area. (Paragraph 102)
The Government welcomes the Environment, Food and
Rural Affairs and Business, Innovation and Skills Committees'
conclusion that confidentiality for complainants to the Adjudicator
is vital. We are glad that neither Committee has raised any concerns
with regard to the provisions within Clause 19, which (with limited
exceptions) prohibits the Adjudicator from disclosing the identity
of a direct or indirect supplier who has complained to the Adjudicator
about a breach of the Groceries Code.
The Government recognises the concerns expressed
by the retailers for the potential resulting costs of maintaining
confidentiality of complainants whilst conducting an investigation
to be significant. The Adjudicator's guidance should mitigate
this risk.
The Government acknowledges that the Adjudicator's
investigations will create costs for the retailer(s) being investigated
and that the type of investigations undertaken may affect the
risk of increasing costs both to the Adjudicator and to the parties.
As set out in Paragraph 6, this is a matter that the Government
would expect to be addressed by the Adjudicator's guidance and
the effectiveness of this guidance is likely to be an area the
Secretary of State will consider when conducting reviews.
The arguments on whether to introduce fines from
inception are finely balanced but we agree with the Committee
on Environment, Food and Rural Affairs that the Competition Commission's
recommendation on this should be adhered to. We therefore recommend
that the Government amend the draft Bill to include fines as a
sanction available to the Adjudicator. This would allow the Adjudicator's
effectiveness to be evaluated on the basis that a full spectrum
of remedies was available from the start. (Paragraph 113)
The Government notes the Environment, Food and Rural
Affairs and Business, Innovation and Skills Committees' position
on the introduction of financial penalties from the commencement
of the Act, as recommended by the Competition Commission.
The Government has carefully considered the powers
and sanctions available to the Adjudicator as a whole and whether,
in that context, it is necessary to introduce financial penalties
from the outset.
As the Committee acknowledges, the arguments are
finely balanced. The immediate introduction of financial penalties
would provide an additional and immediate incentive for retailers
to comply with the Groceries Code. However, the Government remains
of the view that financial penalties should be kept as a reserve
power.
First, the Government considers that the appointment
of the Adjudicator is in itself important to the effectiveness
of the Groceries Code. The Adjudicator will quickly be publishing
guidance and can, from the outset, start to give advice and encourage
compliance with the Groceries Code. This activity should give
the Groceries Code fresh impetus.
Second, the large retailers will know that, if they
breach the Groceries Code, this may now (in addition to the existing
possibility of a contractual claim) lead to complaints by suppliers
and potentially to an investigation by the Adjudicator. An investigation
is something that—quite apart from any sanctions which may
result—retailers will want to avoid.
Third, there is the possibility of an investigation
leading to a recommendation or to a requirement to publish information
about the investigation. Publicity given to breaches of the Groceries
Code by a retailer can be taken into account by those dealing
with it and is likely to encourage that retailer to improve its
compliance with the Groceries Code.
Fourth, large retailers will immediately be conscious
that if there is evidence of significant non-compliance with the
Groceries Code and the existing regime seems not to be sufficiently
effective, there is the prospect of a swift introduction of financial
penalties, without the need for primary legislation. Clearly,
all large retailers will prefer to avoid any risk of financial
penalties being imposed.
The Government considers that, taken together, these
matters will be a powerful deterrent to breach of the Groceries
Code and should contribute to a high level of compliance. It wishes
to allow time for the Adjudicator, and the regime as a whole,
to prove their effectiveness before introducing the additional
sanction of financial penalties.
We believe that the provisions on costs allocations
are reasonable, but the fact that retailers would in certain circumstances
be liable for a substantial share of costs despite being exonerated
suggests that the Adjudicator's guidance should set a demanding
evidential threshold for the launch of an investigation. (Paragraph
116)
The Government welcomes the Committee's conclusion
that the provisions on cost allocations are reasonable but notes
the importance of the Adjudicator's guidance in clarifying the
circumstances in which an investigation will be initiated.
The Government notes that this guidance, as set out
in Clause 13(1)(a), must be in accordance with Clause 4 of the
Bill, which provides that the Adjudicator will only be able to
launch an investigation if the Adjudicator has reasonable grounds
to suspect that a large retailer has breached the Groceries Code.
As explained in paragraph 41 below, the Government also proposes
to amend Clause 4 to allow investigations to be commenced based
on reasonable suspicion that a large retailer has failed to follow
a recommendation.
We are not convinced that a right of judicial
review, restricted as it is to grounds of illegality, irrationality
and procedural impropriety, is an entirely adequate remedy against
a wrong decision of the Adjudicator leading to a large retailer
being named and shamed. We invite the Government to reconsider
its position on this further and investigate the potential for
a speedy and effective appeal mechanism which would also negate
the ability to proceed by judicial review. (Paragraph 119)
The Government acknowledges that the extent to which
the Adjudicator's enforcement decisions should be able to be challenged
before a court is a matter which needs careful consideration.
The Committee's particular concern is the adequacy
of judicial review following a requirement to publish information
about an investigation. By contrast, the Bill provides for a full
right of appeal against a financial penalty. In that case, rather
differently from the simple publication of information, there
is a very direct and immediate consequence for the retailer.
Judicial review will, as the Committee indicates,
typically consider matters of illegality, irrationality and procedural
impropriety. It is true that in a judicial review, the Court will
not make new findings of fact; and this is a restriction on a
retailer's ability to have the full basis of the Adjudicator's
decision reconsidered. However, the Court could consider whether
the Adjudicator had reached a decision which was not supported
by the facts, or had taken account of irrelevant facts, or had
failed to take account of relevant facts.
In considering appeal rights it is also important
to take into account how the Adjudicator will reach his or her
decisions, and the nature of them.
First, the Adjudicator will be a public authority,
independent of Government and of retailers and suppliers, who
will carry out investigations objectively and impartially. He
or she will be bound by the rules of natural justice and will
set and follow fair procedures, using the Bill's investigation
powers where necessary. The Government is confident that the Adjudicator
will establish the relevant facts properly.
Second, an investigation is far from a simple fact
finding matter. The Adjudicator will apply specialist expertise
to consider the relevant facts in the context of relationships
between retailers and suppliers, taking into account the overall
scheme of the Groceries Code and the Groceries Supply Order and
the underlying objective of remedying the adverse effect on competition
identified by the Competition Commission.
Third, as investigations are expected to be wide
ranging and to consider a pattern of behaviour, the importance
of any particular fact is reduced. The Government considers that
these factors reduce the need for a full right of appeal.
Furthermore, an investigation, and the publication
of information about it, do not in themselves determine that a
retailer has any obligation to any particular supplier. It would
still be necessary for the supplier to prove its case and claim
a remedy through arbitration. The arbitrator could reconsider
facts on which the Adjudicator had made a finding.
In view of these factors, the Government remains
of the view that judicial review is an appropriate and adequate
remedy in the case of a requirement to publish.
In reaching this view, the Government has also taken
into account the implications which a full right of appeal could
have for the effectiveness of the Adjudicator. A full right of
appeal, potentially requiring a repetition of a detailed fact
finding exercise carried out by the Adjudicator, could result
in a serious delay in the requirement on the retailer to publish.
Moreover, as the Adjudicator's investigation report would presumably
contain much of the same material as that required to be published
by the retailer, a full right of appeal could also call into question
the ability of the Adjudicator to publish his or her own report
pending the appeal. Indeed, if a full right of appeal against
a requirement to publish is needed, it might be argued that any
Adjudicator's investigation report—including one which resulted
in no enforcement or merely made a recommendation—should
be subject to a full right of appeal. The danger of this is that,
by the time there is publication by the Adjudicator and/or the
retailer after the time required for a full appeal, its impact
is seriously diminished. Publication of the findings of an investigation
shares information which those dealing with the retailer may want
to take into account, and in appropriate cases should encourage
the retailer to increase its level of compliance with the Groceries
Code. These advantages may be jeopardised by the delay inherent
in a full appeal.
We believe that the Adjudicator should be given
the power to escalate penalties for non-compliance in the event
of continuing breach. The Government should consider ways to achieve
this, consistent with there being appropriate judicial review
and/or appeal rights for large retailers. (Paragraph 126)
The Government appreciates the arguments put forward
by the Committee that some form of escalation may be required
if a retailer has failed to comply with a recommendation, whilst
also taking into account due process and proportionality.
The Bill already provides for enforcement mechanisms
(Clauses 9 and 10) should a retailer fail to comply with the other
sanctions (i.e. requirement to publish information, or financial
penalties). But the Government understands the Committee's concern
to be how to address the continuation of behaviour which breaches
the Groceries Code by a retailer against which sanctions have
already been imposed following an investigation.
The Government has considered how this could best
be provided for in the Bill.
The Government proposes to provide: (a) a power for
the Adjudicator to require information from a retailer in order
to monitor whether a recommendation has been followed, (b) a power
to start investigations based on this information i.e. where there
are reasonable grounds to suspect a failure to follow a recommendation(s)
and (c) the power to impose further remedies if the investigation
finds a breach of the Groceries Code. These provisions can be
implemented by amendments to Clauses 4 and 8, and to Schedule
2.
Escalation will in effect be possible provided that
the Adjudicator, following the first investigation, imposes a
recommendation, either on its own or alongside another sanction.
The Government believes this is an approach which encourages precision
on the part of the Adjudicator and is fair to the retailer. The
recommendation will set out what is the future behaviour which
is expected of the retailer following the first investigation,
so the retailer is clear what this is. However, it will remain
the case that a failure to follow a recommendation will not, in
itself, result in a sanction against a retailer: a sanction must
be based on a breach of the Groceries Code.
The Government is therefore proposing that evidence
of a failure to follow a recommendation can trigger a subsequent
investigation, to establish a further breach of the Groceries
Code, which could lead to new remedies being imposed.
ADVICE AND GUIDANCE BY THE ADJUDICATOR
The Adjudicator's guidance will need to take full
account of the views of those who have a stake in making the office
successful, fair and efficient, and reviewing the guidance will
be an important part of the first overall review of the Adjudicator's
efficacy. That should help address the concerns that Parliament
will not have seen the guidance before enactment. (Paragraph 138)
Work should commence now on determining suitable
precedents and parameters for guidance, so that once the Adjudicator
is appointed there is minimum delay in finalising the guidance
and opening for business. (Paragraph 139)
The Government appreciates the Committee's focus
on both the importance of the guidance to be issued by the Adjudicator,
and the review of this guidance at the first formal review process.
It agrees that these will be critical to the successful operation
of the Adjudicator.
The Government will begin consideration of the guidance
well in advance of the Adjudicator's appointment and will ensure
that all stakeholders with an interest in making the office successful,
fair and efficient are included in this process. However, the
Government would like to re-emphasise the point that it will be
the Adjudicator's guidance and it is therefore not appropriate
for Government to direct the Adjudicator on this matter, or to
carry out so much preliminary work that the Adjudicator's freedom
to determine the guidance would be unduly circumscribed. The final
guidance must be determined by the Adjudicator, following due
consultation with appropriate parties, in accordance with the
procedure set out in Clause 13.
REPORTING AND ACCOUNTABILITY
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.
(Paragraph 147)
The Government accepts the Committee's recommendation
that the first review should be as soon as possible after two
full years of operation, consistent with annual review periods
ending on 31 March, as opposed to the current proposal of three
full years.
This can be achieved by amending Clause 16(2).
With regard to the Committee's concerns about how
quickly the proposed funding model can be adjusted by order made
by the Secretary of State '…to reflect the time and expense
that the Adjudicator expects (in the light of previous experience)
to incur in dealing with matters relating to different retailers.'
(Clause 20(5)), the Government wishes to highlight that the proposed
Bill, as drafted, does not stipulate this could happen only after
a formal review period. The Government would note, however, that
it would take some time for the Adjudicator to gain a full appreciation
of the cost drivers of its operation.
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. (Paragraph 154)
The Government welcomes the Committee's conclusion
that the Office of Fair Trading is the most suitable body to physically
locate the Adjudicator.
The Government accepts that limiting secondments
to the Adjudicator to those from the Department for Business,
Innovation and Skills and the Office of Fair Trading could be
unduly restrictive. It will therefore amend the Bill to allow
secondment from across the whole of the public sector. This can
be achieved by amending Schedule 1(9).
FUNDING
We have concerns that the Impact Assessment may
not reflect the costs in any realistic manner. When it brings
forward a Bill, the Department will need to demonstrate that its
assessment of costs is sufficiently evidence-based to stand up
to scrutiny. (Paragraph 163)
The Government notes the Committee's concerns regarding
the Regulatory Impact Assessment (RIA).
The RIA sets out the estimated costs of the Adjudicator
based on the available evidence. The Government stands by the
evidence behind the RIA, which was signed off as 'green' by the
Regulatory Policy Committee.
The Government notes the costs already incurred by
the retailers in complying with the Groceries Code but would emphasise
that these are distinct from the new costs that will be caused
by the Adjudicator. As it stands, there has been no further compelling
evidence from either the Committee or other sources to suggest
that the overall costs of the Adjudicator performing its functions
will be higher than those set out in the RIA. As a result, the
Government considers the RIA as published continues to provide
the best estimate of costs available at this time.
Ultimately, if the Adjudicator's office succeeds
in creating a culture of greater compliance with the GSCOP, its
value might be largely in deterrence rather than in active investigation.
In that case, we would expect to see the Adjudicator's funding
being appropriately pared back, possibly to part-time rather than
a full-time role, with a small back office providing supporting
functions. (Paragraph 164)
The Government agrees with the Committee's suggestion
that the Adjudicator's role might in due course be part-time.
As currently envisaged, the Adjudicator could be either a full
time or part time role. This is already provided for in the Bill
in Schedule 1(6).
We agree with the Government's proposed initial,
flat-fee model for the levy, but recommend that the model be refined
as soon as possible toward one that clearly rewards compliance
with the Code. (Paragraph 167)
The Government welcomes the Committee's conclusion
that the proposed initial, flat-fee model for the levy is most
appropriate. As described in paragraph 48, the Bill provides for
the funding model to be refined in the future.
POSSIBLE EXTENSION OF THE CODE
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. (Paragraph
172)
The Government notes the Committee's views on this
matter.
The Groceries Code is related to the Groceries (Supply
Chain Practices) Market Investigation Order 2009, the result of
a two year Competition Commission investigation concluded in 2008.
Any extension of the Groceries Code would require further investigation
to establish a sufficient evidence base.
SHOULD THE ADJUDICATOR DISTINGUISH
BETWEEN DIFFERENT SIZES OF SUPPLIER?
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. (Paragraph 176)
The Government welcomes the Committee's conclusion
that in practical terms it would be difficult to draw a justifiable
distinction between classes of supplier.
The Government agrees with the expectation of the
Committee that the Adjudicator would wish to prioritise its resources
to where the most acute adverse effect on competition was found
by the Competition Commission i.e. with smaller suppliers.
PLAIN ENGLISH DRAFTING
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.
The Government is glad that the Committee broadly
approved of the ways in which the draft Bill had been presented
in a way that helps wider understanding of the purpose of the
proposed new law and how it would work.
Regarding the Committee's suggestion that the definition
of the term 'suppliers' could be clarified, the Government will
consider ways in which this definition could be amended to make
clear to the reader that both direct and indirect suppliers are
covered by the definition of 'supplier'.
MAKING PROGRESS WITH THE BILL
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. (Paragraph 182)
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. (Paragraph
183)
The Government would again like to take this opportunity
to thank the Select Committee and all parties that participated
in this excellent pre-legislative scrutiny process. It has been
an extremely useful exercise for the Government.
The Government has carefully considered all of the
suggestions proposed by the Committee and will be seeking to introduce
the legislation as soon as Parliamentary time allows.
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