HC 1224 Draft Groceries Code Adjudicator Bill

Written evidence submitted by the National Farmers’ Union, Scotland

1. NFU Scotland (NFUS) represents 9,000 farmers, crofters and growers across Scotland. We welcome the opportunity to comment on the Draft Groceries Code Adjudicator Bill.

2. NFU Scotland has pushed for the creation of a supermarket adjudicator since 2004.

3. In the main, supermarkets deal directly with food and drink processors, not with farmers. However, the relationship between supermarkets and their direct suppliers has a direct impact on the economic viability of farm businesses. This relationship can work very well, benefiting every link in the supply chain. However, there is evidence that the imbalance in negotiating strength between supermarkets and the rest of the supply chain can lead to abuses of power. There has been no effective mechanism to address these situations. The Scottish food industry, rural communities and consumers therefore needs the introduction of an independent ombudsman to enforce the Groceries Supply Code of Practice and to police fair trade in the UK food supply chain.

4. In summary, the view of NFU Scotland is:

· The GCA must have the ability to act proactively.

· The main body of work for the adjudicator should be in monitoring patterns of behaviour, as opposed to monitoring individual supplier-retailer relationships.

· NFU Scotland believes a system of post-dispute monitoring by the adjudicator is necessary.

· The Groceries Code Adjudicator must have the power to impose fines on retailers who are found to be in breach of the Groceries code.

· NFU Scotland believes that annual reporting from the adjudication body needs to go further than simply outlining how many investigations took place over the year.

Background

5. NFU Scotland welcomes the draft GCA bill, as presented to Parliament in May 2011.

6. That being said, there are a number of areas where NFU Scotland believes the bill is prohibitive in the pursuit of a positive and effective role for the GCA. This submission makes a number of recommendations to addresses those elements.

The remit of an adjudicator and initiating an investigation

7. NFU Scotland believes that to be effective, the GCA must have the ability to act proactively.

8. Under the draft bill, the adjudicator relies solely on evidence presented by suppliers (or publicly available information) when deciding whether or not to initiate an investigation. In this scenario, NFU Scotland believes that the likelihood of a complaint being made by a single supplier under this draft bill is small.

9. As a single retail contract may be supporting a large proportion of a supplier business, a climate of fear undoubtedly exists around making a complaint. Furthermore, supermarkets have a preference to deal with just one or two suppliers within a commodity and so it is difficult to see how anonymity can be protected should a complaint come directly from a supplier. NFU Scotland believes that it is for this reason that no complaints were made under the former Supermarket code of practice.

10. As a result, NFU Scotland believes that the main body of work for the adjudicator will be in monitoring patterns of behaviour, as opposed to monitoring individual supplier-retailer relationships.

11. Therefore, the role of the adjudicating body should be defined in a way that allows credible evidence from third parties to be used to initiate an investigation.

Third party reporting

12. To allow evidence from third parties to be used to initiate an investigation offers a number of significant benefits. Firstly, allowing third party reporting would help to protect the anonymity of suppliers making a complaint. As mentioned above, NFUS suspects that the lack of complaints currently made are due to suppliers fearing retaliatory action from the retailer to which they make a complaint. By allowing third parties to submit credible evidence to the adjudicating body, the anonymity of suppliers can be protected. This is essential to the success of the adjudicating body.

13. A further benefit of third party engagement may be that there is a positive impact in terms of resource efficiency for the adjudicator. NFU Scotland understands from the draft bill that the adjudicator is likely to have limited resources. Allowing trade organisations and NGOs to assemble a body of evidence, for presentation to the adjudicator, may relieve the initial administrative body that comes from initiating an investigation.

Protecting anonymity

14. NFU Scotland believes that protecting the anonymity of suppliers is key to the entire adjudication process. This will be particularly difficult in Scotland where in some commodities there may be only one or two suppliers in a product category to a retailer. If anonymity breaks down it would be easy for suppliers to fall victim to retaliation from supermarkets, damaging, and potentially ending, an important commercial relationship. While de-listing would presumably result in a separate investigation under the Groceries Code, it is arguable that a business relationship would not survive this in any case. It is critical that the adjudicating body at all times through the investigation process protects the anonymity of suppliers.

15. NFU Scotland believes a system of post-dispute monitoring by the adjudicator may be appropriate to prevent further breaches if a supplier-retail business relationship has been harmed in any way.

Power to levy fines

16. NFU Scotland believes that the Groceries Code Adjudicator must have the power to impose fines on retailers who are found to be in breach of the Groceries code. While ‘naming and shaming’ supermarkets will function as a deterrent to some degree, NFU Scotland believe the general public will only truly appreciate negative publicity if a ‘fine’ amount is attached. Without a system of fines, media attention is likely to be minimal and so too the fear of reputation damage from the retailers. These fines must be flexible enough to be considered on a case by case basis, but large enough to function as a deterrent. NFU Scotland believes that naming and shaming will only work if carried out hand in hand with fining.

Measuring efficiency

17. NFU Scotland believes that annual reporting from the adjudication body needs to go further than simply outlining how many investigations took place over the year. The report should be as full and frank an account as possible that details resulting outcomes from investigations. By simply outlining the number of investigations that have taken place the analysis of the adjudicator’s effectiveness as a body may be skewed.

Adjudicator staffing

18. The draft bill outlines that the intention is to staff the adjudicating body by secondment by the Secretary of State or the Office of Fair Trading. NFU Scotland requests that staff from Defra are also considered from secondment. This would ensure there are staff available with knowledge/experience of the interests of growers/suppliers.

Timescale

19. NFU Scotland is keen to stress the importance of a rapid introduction of a Groceries Code adjudicator, and would like to see the bill fast tracked within the next session.

15 June 2011