Groceries Code Adjudicator Bill [Lords]
The Committee consisted of the following Members:
Neil Caulfield, Kate Emms, Committee Clerks
† attended the Committee
Groceries Code Adjudicator Bill [Lords]
‘(1) The Adjudicator may carry out an investigation where there are reasonable grounds to suspect that a large retailer has—
(a) broken the Groceries Code; or
(b) failed to follow a recommendation made under section 7; or
(c) failed to incorporate the Groceries Code into a supply agreement, as required under Article 5 of the Groceries Supply Order.’.—(Andrew George.)
Amendment 20, in clause 6, page 2, line 26, leave out from ‘that’ to end of line 28 and insert ‘any of the grounds for launching an investigation under section 4(1) has in fact occurred, the Adjudicator may take one or more of the following enforcement measures—’.
‘(1) If the Adjudicator chooses to enforce through making recommendations, that means—
(a) in the case that a retailer has been found to have broken the Groceries Code, or has failed to follow a previous recommendation made under this section, recommending what the large retailer should do in order to comply with the Groceries Code; and
(b) in the case that a retailer has been found to have failed to incorporate the Groceries Code into a Supply Agreement, as required under Article 5 of the Groceries Supply Order, recommending what the large retailer should do in order to comply with Article 5 of the Groceries Supply Order.’.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): I am delighted to be back for the second sitting of this Bill Committee and to be here for the first one under your chairmanship, Sir Roger. I am sure that we will continue with this morning’s enjoyable and good-humoured debates on the detail of this important measure. Just before we broke for lunch to see what else was happening in the House by way of statements and so on, my hon. Friend the Member for Camborne and Redruth asked what
I had outlined why it would be helpful if recommendations did not always have to be sanctioned if they were not followed. There may be cases where the retailer could fulfil the ultimate aim of complying with the code by using a slightly different method from the specific tasks set out in the adjudicator’s recommendations. None the less, I understand the concern about retailers who are seen to be flouting recommendations that the adjudicator puts in place, presumably for good reason. That is worth considering in the context of escalation.
We obviously do not want cases whereby retailers do not follow the adjudicator’s recommendations, but there are already protections in place, which I will share with the Committee, that will hopefully provide the reassurance that my hon. Friend seeks.
First, it is important to note that the adjudicator has a duty to monitor whether a recommendation has been followed. They have powers under schedule 2 to require information from a retailer to determine whether a recommendation has been followed. Paragraph 1(2) of schedule 2 states:
That sets out clearly that the adjudicator will monitor whether the recommendations are being followed. If they have reasonable grounds to suspect that a recommendation is not being followed, which may well be the case after they have exercised their powers under schedule 2, they can begin a new investigation.
To go back to the example of Bob and the training, and his incorrectly issuing a contract that was not compliant with the code, I suspect that if the adjudicator found that the compliance officer had not looked at Bob’s contracts, but that training had been undertaken and that Bob was now operating effectively, they would accept that the code was not being broken and that all was well, even though a recommendation had not been followed to the letter. Importantly, however, if they found that the code was being broken, they could start a new investigation.
Ian Murray (Edinburgh South) (Lab): Does the Minister not appreciate that amendment 20, tabled by the hon. Member for St Ives, essentially says that the Bill, as it stands, almost has a full stop after any penalty is issued? Rather than a new investigation being started if recommendations are not complied with, that amendment would simply allow the adjudicator to refer the matter back to clause 4 and run through the procedure again.
Jo Swinson: I understand the sentiment behind what my hon. Friend the Member for St Ives is trying to achieve, but the consequence would be that the recommendations, which are supposed to be a light-touch tool for the adjudicator, would cease to be light-touch because they would become binding. That would not necessarily be the best way to ensure compliance with the code because the adjudicator may not always be
However, it is important that that procedure is in place so that the new investigation can begin. Obviously, it will be up to the adjudicator, but if a particular retailer had not followed recommendations and was therefore committing a regular breach of the code, it follows in logic that a reasonable adjudicator would be tempted to reach for the more severe powers at their disposal on the next occasion. A recommendation is their lightest-touch tool in terms of powers, and they could still name and shame in any subsequent investigation, or impose fines. I suspect that there would be an appetite for the adjudicator not to take it lightly if any retailer tried to ignore an investigation’s findings. That kind of escalation is more appropriate than making recommendations binding. Attractive as that may appear superficially, I have pointed out some of the problems that might arise when the code could be complied with through a method different from the specific recommendations. The bottom line, and what is important, is that the code is complied with.
Andrew George (St Ives) (LD): On the issue I raised through amendment 40 about items purchased for resale by arm’s length or subsidiary companies operating on behalf of the retailer, is my hon. Friend content that the basis of the argument is well made? Does she accept that the non-governmental organisations and others who advance that argument have a fair point and that, even if it is not to be addressed by amendment 40, it deserves to be tackled in her response or in some other way?
Jo Swinson: My earlier comments on amendment 40 were about ensuring that the principle was kept between the OFT and the groceries code: the groceries code adjudicator is there for the code, and the OFT is there to enforce the order. It is important that we keep those two different things separate. My hon. Friend made some points that we may come to in our debate on amendment 17, and I will be delighted to debate those issues further at that juncture.
Andrew George: It is a pleasure to have you with us and to serve under your chairmanship, Sir Roger. I am grateful to the Minister for her response. The context of clause 4 needs to be borne in mind when looking at the amendments. As I said in my opening remarks, it is important that we recognise that market intelligence can be used as the reasonable grounds on which the adjudicator instigates an investigation. That is vital, and an essential basis that underpins the Bill.
In addition, it is reasonable, if market intelligence can be used—that intelligence may be gathered, for example, from trade bodies that may advance a particular case—that it is tempered by clause 10, which ensures
The Minister gave reasons why the amendments are not necessary. However, I thought that tabling the amendments and teasing these points out was indeed necessary. It is important that the Minister and the Government reflect on the points made during the debate, and, having reflected, consider whether any further tinkering or amendment is necessary.
Huw Irranca-Davies (Ogmore) (Lab): The hon. Gentleman is making a very considered response to the Minister’s statements, but I share his concern in that I am not quite clear about how enforcement is stepped up in the case of a repeat offender or somebody who, one way or another, wheedles their way out of the recommendations. It is not entirely clear to me, so I am taking this opportunity, through an intervention, to give the Minister a chance to clarify the issue for the hon. Gentleman as well.
Jo Swinson: The key thing to bear in mind is that the adjudicator will have recourse to three types of action: recommendations, naming and shaming, and fining. They will have the ability to instigate an investigation when they have reasonable grounds for believing that the code has been broken, and the powers to check whether the recommendations are being followed. In the scenario where they are not being followed and there are reasonable grounds for believing that the code has been broken, they can do an investigation. Without prejudicing what the adjudicator would do in a particular case, I suspect that any adjudicator would take a pretty dim view of retailers flouting what they had been asked to do to comply with the code. If necessary, further sanctions are available, such as naming and shaming, and fining, which a retailer could not weasel out of.
Andrew George: I am grateful to the Minister for that intervention, because it seems to indicate that the power to escalate enforcement action is available to the adjudicator in extremis, or where the adjudicator is unimpressed by the retailer’s response to the recommendations. There was perhaps a grey area there, and some uncertainty about the capacity of the adjudicator to escalate. Perhaps we can come back to that at a later stage.
The Minister also said, in the dim and distant earlier part of our proceedings, that suppliers have a recourse in law through the Enterprise Act 2002. That comment would probably be taken with a very large dose of salt by a lot of suppliers who already fail to use the previous voluntary code, and indeed the existing code, as a means of resolving disputes with retailers, for all the reasons I have explained already.
I entirely accept the Minister’s point that retailers will often find a more appropriate way of satisfying the recommendation than the way the adjudicator has
‘(4) The Adjudicator will have authority to review compliance and to undertake one or more investigations if the Adjudicator suspects that there has been any breach of the Groceries Code since that Code came into force on 4 February 2010.’.
Andrew George: I particularly wanted to introduce those amendments as I had advanced the point with both the Minister and the Minister of State, Department for Environment, Food and Rural Affairs on Second Reading. I want to remind people that the adjudicator is merely the referee that has been brought in to enforce a code that was introduced 4 February 2010. There is, therefore, a fundamental point of natural justice, apart from making sure that we do the right thing: if there have been flagrant abuses of that code by retailers that commenced and ceased—perhaps in some cases, cynically—just before the adjudicator was appointed, the responses that I received from my hon. Friends suggest that those abuses and breaches of the code should be ignored and that no action can be taken. I understand that, for example, the Gangmasters Licensing Authority has been gathering evidence of alleged breaches of the code numbering up to 1,000, which it intends to bring to the attention of the adjudicator when they are appointed.
Apart from anything else, if we want to make sure that, when the adjudicator is appointed, they are up and running, effective and can deal with the reality of the challenges that they will inevitably face, what could be better than giving them the power to review some of the alleged breaches of the code that happened before their appointment? That would be the most instructive way of getting them up and running.
Huw Irranca-Davies: The hon. Gentleman makes a strong point, and I hope that he does not automatically concede that this is a purely probing amendment. As he knows, the adjudicator may well be in place in a shadow form, possibly before the full implementation of the Bill. I hope that the adjudicator in shadow form will earn their salary, and will look not simply from that day zero forward, but at the continuity of issues that go back to the start of the code. That is a good one to ask the Minister to respond to positively. The code is in
Andrew George: I am grateful to the hon. Gentleman for making that particular point, and certainly I was grateful to the Minister for her intervention on me in column 363 of Hansard on Second Reading on 19 November 2012. Later in that debate when the Minister of State, Department for Environment, Food and Rural Affairs was speaking, I intervened on him. He made it clear that there is:
“A strong principle in British legislation that we do not apply retrospectivity to something that occurred before the date that a particular statute comes into effect. Therefore it would not be entirely proper for the adjudicator to look at complaints within the terms of the code that pre-dated that appointment if they no longer continue.”
I intervened in order to point out to my hon. Friend the Member for Somerton and Frome that of course the statute—and the statutory right of the Competition Commission to introduce a statute—in fact came into effect under the code on 4 February 2010. The Bill is merely the means by which that statute is monitored and enforced. It is simply the referee of the rules and statutes that were established more than two years ago.
“would care to engage with Government lawyers on that point of law, I am sure we would be happy to engage with him. We can return to the subject in Committee or on Report.”—[Official Report, 19 November 2012; Vol. 553, c. 409.]
We are now in Committee, and we have the opportunity to be clear about which statute we are talking about. In my view, the key statute is indeed the code, and the Bill is merely the mechanism of enforcement.
Ian Murray: The hon. Gentleman is hugely influential on these matters, and indeed the hon. Member for Somerton and Frome said that the Government would look at this. However, surely the principle of Government legislation must be that if someone has broken the code, then they have broken the code. Simply because the referee is now coming in to referee that code, if it has been broken then it has been broken, and therefore remedies should be sought.
Andrew George: I entirely agree, and that is why I do not think that it is appropriate for any Government to, in effect, send a message that they will turn a blind eye to breaches of the law—and that is what it is. It is a breaching of the law, of a statutory code. This is not a voluntary code; it is a statute. The Government are in effect saying that this issue is more than their job is worth and they do not want to be troubled by having to retrospectively trawl through all these issues. That is the “blind eye approach” to this matter. I think that sends out entirely the wrong message, quite apart from anything else.
I would quite understand if the Minister said that the Government could look at it but that they will not have—and of course they would not have had at the time—the powers to fine, for example, because fining is being introduced in the Bill. There may indeed be a halfway house; I do not know. Perhaps I am trying to
On this point, Sir Roger, I wish to make it clear once again—and my saying so may aggrieve the hon. Member for Ogmore—that this is indeed a probing amendment. I made it clear on Second Reading that it is important in my view that this issue is addressed. I hope that the Government will listen to the points that I at least am making, and that perhaps others may wish to make, and having reflected on it perhaps bring forward some amendments of their own on Report.
Ian Murray: I am very grateful to the hon. Member for St Ives for giving way. I appreciate the consensual spirit in which this Committee has moved forward. We all support the amendments that the hon. Gentleman has tabled to this particular Bill, but would he not agree that he probed at Second Reading, and indeed has been probing since, and is now still probing? It is about time that the Minister stopped receiving the probing and acted on it.
On Second Reading, it was suggested that we should debate the matter and seek clarity in Committee. We still have one further stage, Report. I have been given the opportunity to at least advance the point that as far as we are concerned, the statute in this case is the code and not the Bill.
Huw Irranca-Davies: I am just going to probe the hon. Gentleman by way of an intervention. I suggest to him that one good reason behind amendment 50, in concert with his other amendment, is that it would allow the new adjudicator or the shadow adjudicator, once they are in position, to examine patterns of behaviour that might contribute to a new investigation. It would allow them to go back and say, “Actually, we have seen this before on repeated occasions since the code was in place, so it is worth while to go back and look at it.” That is why there is merit in the combination of amendments.
Andrew George: I entirely take that point. I said earlier that in effect, if the groceries code adjudicator wants to learn on the job quickly, if they identify that particular retailers have form with regard to certain practices and get to know the wily activities that some of them get up to as a result of investigations, which may be retrospective, that can only enhance the adjudicator’s effectiveness, knowledge and ability, so that they do not come in blinking, wide-eyed and naive on day one,
Huw Irranca-Davies: It is a great pleasure to serve under your stewardship once again, Sir Roger. In supporting these probing amendments, I seek reassurance from the Minister that in their absence, the adjudicator—or the shadow adjudicator, should they be in place before the Bill receives Royal Assent, as we hope it will—will be able to look backwards, particularly at incidents where there might be strong evidence of practices that would now fall foul of penalties under the remit of the Bill, to name and shame and even, although we want it as a last resort, to impose financial penalties.
The hon. Member for St Ives made a wise point in saying that legally, there might well be an exemplary case to say that sanctions cannot be applied retrospectively, but I do not think that this Committee would want to inhibit the new adjudicator’s ability to look afresh where evidence exists. If that takes the adjudicator backwards in the chronology to when the code started, so be it, because the adjudicator should learn as they go. That is the assurance that I seek from the Minister. I am sure that she will be able to give it, but we need to know that the adjudicator will not be inhibited in any way from dealing with what will undoubtedly be on their desk from the moment they arrive, and that they will be able to follow the trail a little bit backwards, even if they are not allowed to apply sanctions. I support the amendment, and I hope that the Minister can give that categorical assurance.
Jo Swinson: I welcome the opportunity to discuss such issues, because it is helpful to get clarity. I fear that I might disappoint some Members by not being able to accept the amendment, but as my hon. Friend has intimated that his amendment is a probing one, Opposition Members might be more disappointed than he is. None the less, I hope to provide reassurance for all members of the Committee.
On retrospective penalties, there is a general legal principle that laws do not apply retrospectively, and I am sure that Members will appreciate that that is for a good reason. It has been argued that the legal obligation was in force because the code itself had been in force since February 2010, and retailers knew that they were legally obliged to comply with it. That is, of course, true, but it is also the case that they expected to run the risk of a breach of contract claim if they did not comply. That is a bit different from the enforcement sanctions that the adjudicator will introduce, whether they be recommendations or naming and shaming and financial penalties. The issue is not, therefore, just that the breach itself was in place as an actual breach; it is about whether the consequences were clear.
The retrospectivity applies to whether there is a breach—and a breach from February 2010 onwards was a breach because the code was in place—but the consequences will obviously be different once the adjudicator is up
Sheila Gilmore (Edinburgh East) (Lab): Is there a difference between carrying out an investigation and reviewing compliance, which is what the amendment appears to suggest, and imposing a penalty? The point about retrospective penalties is well known and respected, but from my reading of the amendment it does not necessarily suggest that the reviews would lead to punishment, rather that they would enable past practices to be investigated and commented upon.
Jo Swinson: I hope to be able to give some reassurance to the Committee. The key criterion is whether there are reasonable grounds for suspecting that there is a breach of the code. We really want the adjudicator to focus on getting retailers to comply with the code, and if a retailer has breached the code but has since come into compliance, and is complying when the groceries code adjudicator comes into force, that is not necessarily the best use of the focus of the adjudicator’s attentions. We want the adjudicator to focus on areas where there is not compliance.
Huw Irranca-Davies: Is the Minister saying that if, from the moment the Bill receives Royal Assent and the adjudicator is there, a live case reveals a certain pattern of behaviour, the adjudicator will be allowed to follow that trail chronologically backwards to uncover for how long the pattern has existed, or that the provision applies only from the day on which the adjudicator starts with his powers?
Jo Swinson: I welcome the opportunity to be clear on that matter. The investigation will be instigated, once the adjudicator comes into being, on the basis of a suspicion that there is a live breach of the code. However, Members rightly point out that there may be an e-mail trail or information going back to before the adjudicator was in place that is helpful in building the case and pattern of behaviour. That is, therefore, information that the adjudicator will be able to look at, as long as there are reasonable grounds to suspect a live breach of the code. I think that should reassure the Committee.
Andrew George: Given the Minister’s earlier remark that the primary purpose of the adjudicator is to ensure compliance with the code, is she advancing that argument to say that, therefore, she is merely advising the adjudicator on how to behave once appointed? Or is she saying that the adjudicator has no authority in law to undertake any investigations? It seems that we are talking about investigations here. Has the adjudicator any authority
Jo Swinson: I am happy to clarify. The investigation must be based on the suspicion that there is a live, new breach that is current since the adjudicator has been set up. If there has been a previous breach that is no longer a breach or there is no reasonable suspicion of an ongoing breach, that would not be grounds for instigating a new investigation. On the basic grounds of practicality, of ensuring that the adjudicator is focused on driving compliance, it is more sensible for them to spend time on areas where there is not currently compliance than on areas where, by definition of what I have just said, there is currently compliance even if things were not done properly in the past.
Andrew George: I thank the Minister for that response. When she says that it would not be grounds for undertaking an investigation, is she saying that the adjudicator would be disempowered from undertaking an investigation—merely giving advice, in other words—or is she saying it would be better for the adjudicator to concentrate on compliance in the present and future rather than worry about what may have happened in the past?
Jo Swinson: I am saying that the power we have set out in statute will be based on there being grounds for suspicion that there is a current breach. My rationale that that is the right position for the Bill to set out is analysis that it makes sense for the adjudicator to be able to prioritise. The investigatory power is on the basis of a current breach. If there are no reasonable grounds of suspicion of a current breach, there are no grounds to start an investigation.
Huw Irranca-Davies: I understand the Minister’s focus on a current breach. She has talked of the possibility of an adjudicator following, as part of the investigation into a current breach, an investigation that may follow what she described as an e-mail chain. What if evidence is brought forward, or is already there, that is not connected with the immediate live case but shows with a particular retailer, heaven forfend, that in the past 12 months there have been three or four different occasions, not linked to that particular case, all showing that same approach to breaking or misapplying the code? Is the Minister saying that the adjudicator should not follow those, unless they are directly related to the individual case that is right in front of them on their desk?
Jo Swinson: I am saying there are alternative routes for justice in those scenarios. The existing routes are open. Suppliers in that situation that have evidence that the code is currently being breached—before the adjudicator exists—can take those cases forward as a breach of contract and can potentially get redress through that methodology. There is a potential overlap. Currently, if a supplier is concerned about a breach of the code, they can go through an arbitration process where the retailer may give redress, depending on the findings of the arbitration. That is open to suppliers at the moment and the adjudicator will take on the arbitration function. In the arbitration function, they may look at previous issues, but that is separate from the investigation function.
Huw Irranca-Davies: I want to pursue that important point. I do not want to put words in the Minister’s mouth, but it seems she is saying that if there were two or three primary producers who said, “We strongly suspect that this is going on; we know you are pursuing a line of investigation; we have evidence that this has gone on within the last year and we can name people who have been affected by it,” her advice is to pursue a different course of action. She seems to be saying, “Do not bring that to the adjudicator, because they will not be empowered. They will not be guided by Ministers to follow that particular course of investigation as part of the overall investigation into the retailer.”
Jo Swinson: It depends on the facts of the case. If the additional information that is brought forward is relevant to the current live investigation, it would certainly be sensible for the adjudicator to consider that. If it is unrelated and also not live, and not current and ongoing beyond the date at which the adjudicator comes into force, the adjudicator will know that they do not have the power to lodge an investigation on that basis. I imagine that they would advise that other methods would be the right way to take that forward, and I am sure they will be able to say that to anybody who came forward with that particular scenario.
Andrew George: I am grateful to the Minister for giving way. On the point that the hon. Member for Ogmore raised regarding the availability to suppliers to use the existing code and the powers of arbitration, there are recourses that are available to suppliers in the code. Given the concerns that we have raised about the climate of fear and the fact that suppliers themselves would never use those recourses, because of the climate of fear, can she inform the Committee whether, in the past two and a half years, any suppliers have indeed used any of the recourses available to them under the code?
Jo Swinson: I certainly can say, from one of the meetings that I had with retailers, that they have been having discussions with suppliers. They have had positive discussions. There have been occasions when issues have been brought to the retailers and it has been possible to resolve the issues. They obviously hotly dispute the existence of a climate of fear, and the Government are clearly aware that there is a great deal of concern. That is why we brought forward the ability for third parties to make complaints. Anonymity is firmly enshrined in the Bill to provide such protection.
I appreciate that retrospectivity is a bit of an obstacle and that that is to some degree disappointing to the Committee. It is a legal principle that many members of the Committee will wish that we did not have to abide by, but it is important that there is fairness and certainty.
Ian Murray: The Minister is being incredibly generous, as she was this morning. She mentioned third parties and anonymity, but that particular process will be enshrined only when the Bill gets Royal Assent. It would be unfair on suppliers that are in a climate of fear, although I think it is an artificial climate of fear. If someone has a large contract, they will try to do everything possible to keep that contract, so it is perhaps an artificial climate of fear in that sense. I do not think the supermarkets
Jo Swinson: I am not saying that they would not be able to do that if there was an ongoing breach, but if the issue has been resolved, it will not be a matter for the adjudicator, because the code will be complied with. As I have said, that is understandably of some disappointment to the Committee, but if we have a breach and by the time the adjudicator is up and running there is no longer a breach, we should celebrate that. Retailers will have sorted their act out and started to comply with the code and that is the point we all want to get to.
There are other measures in place that the Government implicitly accept are imperfect in bringing forward the Bill. There is a climate of fear, and that is why we are creating the adjudicator. There are other measures that exist for those cases where the retailer has sorted it out and started to comply with the code. We want to reward that behaviour, rather than punish it. We all want the adjudicator to focus on the folk who are seeing current or continuing breaches of the code.
I just wanted to pick up on the issue of the shadow period, which several hon. Members have mentioned. We do not know the exact date of Royal Assent or commencement, but the Government are committed to implementing the Bill with a fair degree of urgency. We published the draft Bill in the first Session of the Parliament and it was the first Bill considered by the other place in this Session. We are keen to get the Bill through all its parliamentary stages so we can get the adjudicator up and running, but there will be a period with a shadow adjudicator designate and we want them to be able to hit the ground running. I slightly disagree with my hon. Friend the Member for St Ives when he talked about the new adjudicator arriving on day one, wide-eyed, blinking and naive, because I hope that that will not be the case, whoever the successful candidate is.
On retrospectivity, there is a further practical issue, which is worth bearing in mind. It was mentioned that 1,000 breaches were being collected by the Gangmasters Licensing Authority. We do not want the adjudicator to be snowed under; we want them to be able to focus on current issues, particularly when they start. Ideally, they will focus on some of the most serious ones. Anything that organisations can do to help prioritise issues will be helpful and well received.
Just to put the issue to bed, once and for all, because people listening to the debate will want utter clarity, if the Ulster Farmers Union and its members are involved in a live investigation in the constituency of the hon. Member for Upper Bann, what happens if the Farmers Union of Wales or NFU Cymru come forward in the constituency of the hon. Member for Carmarthen West and South Pembrokeshire and say, “This has been
Jo Swinson: The hon. Gentleman’s final points are absolutely relevant, because if it relates to the same organisations or the same individuals, there is every reason to think that it may be seen as reasonable grounds and relevant to that case. If it was an entirely different retailer, that would be entirely different. I hesitate to be too prescriptive, because it is up to the adjudicator. What they constitute to be reasonable grounds of suspicion of a live breach are also important, because there is a question of whether there are reasonable grounds of suspicion that it is a current breach if the Welsh farmers say it has been happening to them in the last six months. That all depends on the specific information that comes forward, and that is exactly what the adjudicator is there to look at.
Huw Irranca-Davies: That is very helpful. If there seems to be some direct correlation that is pertinent to a live investigation, then unions, individual producers, suppliers and so on should bring that forward, because it might be useful to the adjudicator. That is a helpful clarification, if I have got that right.
Jo Swinson: Absolutely. The determining factor is whether it is helpful to prove that a live breach is occurring, but the person who is best placed to judge that is the adjudicator. While not wanting to encourage a deluge of irrelevant information to land on the adjudicator’s desk, I equally would not want any message to go out to deter groups from bringing forward what is relevant information.
It is important that the expectation is managed that the adjudicator will not be able to create investigations for breaches that have happened and been resolved, before the adjudicator has properly commenced. We do not want to have unrealistic expectations, but we also do not want to deter individuals and organisations from bringing forward relevant information. It is important, in the shadow period when they are up and running before they have formal powers through the passing of the Act, that they can work on guidance, along with retailers and suppliers and collect some of this information.
It may well be that some of the information that is being discussed about potential breaches may not result in enforcement action, but may be very helpful to the adjudicator in setting out the guidance that they put down. It might also be helpful in terms of some of the communication work that they do with retailers—possibly even being used as examples of bad practice to be avoided. There is a role for it, but there is the underlying principle of retrospectivity that we do not want to breach.
Jo Swinson: I would not want the hon. Gentleman to misunderstand what I mean by guidance. That would clearly be guidance that the adjudicator will be working on. I think it is right for them to work on the guidance that they will issue. They will be best placed to do that and, given that we are establishing the adjudicator to carry out and enforce exactly that role, then it would not be right for Department officials to jump the gun and prejudge what they would wish to be in that guidance. Just for clarity, that is the situation. I am sure that in that process of developing the guidance the adjudicator will be interested in working alongside a whole range of stakeholders, which I am sure will include Members of Parliament, particularly those who have taken a specific interest in this Bill.
Andrew George: This has proven to be an even more useful debate and interlude in the proceedings than I had anticipated. There is still an issue that we need to consider on Report. I hope the Minister will agree. As the hon. Member for Ogmore suggested, it might help if the Minister provided further draft guidance. That might be instructive.
A problem remains with the fundamental principle, and I should like to illustrate it with a metaphor. The law prohibiting the mugging of people could not be enforced in a parish with no police officer; it could be applied only from the day when a police officer was appointed. Retrospective evidence could not be taken to enforce that law, so those who had been mugged previously would not be able to have their grievances addressed even after the police officer’s appointment. In a sense, that is the metaphor for where we are with the issue, and I hope that my hon. Friend will reflect on it in those terms.
My hon. Friend helpfully emphasised the distinction—as I was attempting to do, although not as articulately as she did—between the code and the consequences and sanctions that will be available under the regulation when it is enacted. That might be the helpful thought line between the two of us, and perhaps it would be appropriate in certain circumstances for the adjudicator to undertake investigations into breaches that might have happened since the code was enacted on 4 February 2010, but were no longer happening at the time on which the adjudicator was appointed. It is reasonable to have that availability.
My hon. Friend might also have trammelled the tightrope between advice and law. I am still not clear whether she suggested that, for example, the adjudicator will want to reach wise conclusions about how to deploy properly what will inevitably be a limited resource. That
I would simply leave matters to the adjudicator, who will not be coming wide-eyed, blinking, bushy tailed and rather naive into such investigations. I am sure that they will be an experienced, wise and able person. Let us leave it to the adjudicator to make the judgment about how best to deploy their resources and, on the basis of the quality of the evidence with which they are presented, to decide whether or not it would be wise to pursue a particular line of inquiry and whether they could be engaged in perennial fishing expeditions that could tie their hands and resources when they should be considering the present circumstances and looking forward, rather than in the past.
Jo Swinson: To help my hon. Friend, I want to say that the adjudicator will have a fair degree of flexibility, but within the bounds of the law whereby the issue is a live breach after the date of commencement. The flexibility will be that the adjudicator will decide whether there are reasonable grounds to consider that that is the case. That test is set out under law, but it will it will be up to the adjudicator to determine the reasonable grounds of suspicion.
Andrew George: I fully understand and accept what my hon. Friend has said, but I am just dealing with the argument that, somehow, the adjudicator would not be able to discriminate between useful and appropriate evidence that might instigate an investigation and other evidence that would be insufficient to instigate such an investigation.
With regard to my hon. Friend’s intervention, she said that the issue was about the establishment of the statute and implied that, in fact, day one commences when the Bill becomes an Act, and the adjudicator is in place. My argument is that day one began on 4 February 2010, and that was the statute date. I entirely accept what she said about retrospectivity and applying the code to 3 February 2010 because that would be improper. However, bringing in the referee, or the policemen to investigate mugging incidents that happened two years previously, is, in fact, an appropriate thing to do.
Huw Irranca-Davies: I agree that this has been a useful exploratory debate. However, even with the good reassurances given by the Minister, it may be worth returning to the matter on Report. I am concerned that Committee members are saying, “Yes, we want light-touch regulation, but we do not want the adjudicator to do certain things.” I should like the Minister, perhaps on Report, to say that we would want the adjudicator to use their discretion positively to gather the information that they need, from the commencement of the code, including recent things that might be directly pertinent to a live investigation. However, we seem to be phrasing that with negativity, rather than saying, “Go on. Do the job intelligently in the way that you should be doing it.”
Sir Roger, you identified a technical breach in the drafting of amendment 37, which further emphasises that it is a probing amendment. As the hon. Member for Ogmore said, this useful debate has teased out a number of issues. I hope that my hon. Friend the Minister, who has responded helpfully, fully and generously to the points that have been raised, will reflect on whether we can clarify some points on Report.
The Chair: Before we move on, first, could I gently, through the shadow Minister, remind all Committee members that, although in the Scottish Parliament it is in order to address an hon. Member directly with the term “you”, in the Parliament of the United Kingdom we go through the Chair and refer to the third party. Sometimes, although not at the moment in this Committee, it leads to a more peaceful life.
Secondly, we have had a thorough debate and I am not minded to permit a stand part debate. I mention that now in case there is anything particular that the hon. Member for Edinburgh South, or any other Committee member, wishes to raise before we get to stand part.
‘(2A) The powers to require provision of information as set out in Schedule 2 shall be exercisable from the day on which this Act is passed.’.
Again, it is a great pleasure to be involved in a Committee that you are chairing, Sir Roger. We have had a full debate on the clause. Nothing stirs the loins more in this Committee than those on the Opposition Benches discussing clause 4. Perhaps the Committee will indulge me for slightly longer.
The hon. Member for St Ives has passed the probing baton. Our amendments are similar, with subtle differences in respect of what we should like to achieve. I appreciate and understand what the Minister said. She has been helpful in reassuring the Committee and will perhaps share some draft guidance with its members. She will no doubt reflect on the debate before Report.
No Committee member would expect any legislation to be retrospective, but the point is where retrospective legislation starts. The groceries code came into force in February 2010 and that may be where to draw a line in the sand, because as I said in my intervention on the hon. Member for St Ives, if the code is broken the code is broken. In terms of natural justice, it is right that some remedy could be sought.
The anonymity and third party aspects of the Bill, introduced through debate in the other place, would perhaps give people who would not have brought a case previously some cover in doing so now. It is worthwhile considering that.
Our amendment looks at the period between the Bill having Royal Assent, the adjudicator or shadow adjudicator being appointed and an investigation being able to start in full. We are trying to get some reassurance that there
The day one issues are vital. We have used analogies such as the adjudicator will be fresh faced or a rabbit in the headlights. However we describe it, we do not want to swamp the adjudicator. But if there is a real and tangible set of information and evidence out there that points to a significant and almost catastrophic breach of the code, I hope that information could be collected from day one before the guidance required by clause 12(1) has been put in place. I will not detain the Committee any longer. The hon. Member for Somerton and Frome gave a commitment that we should probe this in Committee. The hon. Member for St Ives has probed where the adjudicator should lie in terms of retrospectivity going back to when the code came into force. The date at which the adjudicator is appointed to the point at which the adjudicator can start investigations is also important. The power should be in the Bill for that evidence and information to be collected as soon as possible after the adjudicator is appointed.
Jo Swinson: I thank hon. Members for the amendment. I recognise the spirit in which it has been tabled and I am grateful for the kind words from the shadow Minister. Everyone is keen to ensure that the adjudicator is up and running as soon as possible and that they can conduct effective investigations. I will ask the shadow Minister to withdraw his amendment and I hope to be able to convince him that it does not make much practical sense for these powers to start on the day the Bill is enacted when the Bill as a whole will not come into force on that date. Instead, it will come into force on a date that the Secretary of State will set out by order. I will give the reassurance that he and others members of the Committee are keen to have. We are committed to ensuring that the Bill comes into force as soon as possible and our intention is to commence all parts of the Bill at the same time, basically because it does not make sense for different parts to start at different times.
Therefore, to have these powers starting before the ability to start an investigation exists does not make a lot of sense. The investigation power will come into play only when the guidance has been published and it is clear that everybody involved knows the framework within which they are working. The specific powers in schedule 2 relate to investigations. That does not for a second mean that the adjudicator cannot ask for
Huw Irranca-Davies: I am mindful of your caution around the clause stand part debate, Sir Roger. The Minister said that an adjudicator investigation could not start until the guidance had been produced. Does she anticipate the adjudicator being there in a shadow role, during which time the guidance will be consulted on and produced, so that an investigation can be carried out at the earliest possible opportunity?
Jo Swinson: The short answer to that is yes. More resources and time will be available once full commencement occurs, but as soon as the adjudicator is appointed, they will be having discussions with stakeholders, so that they can look at information. The formal consultation will obviously take place once the adjudicator formally takes up the role, but in that shadow period, as we discussed in the debate on the previous group of amendments, they will be in discussions with stakeholders, which will be helpful. That will mean that they are in a better position for the formal consultation. Of course, there is a six-month deadline after commencement for the guidance to be in place. It is important that we get it right, but it is also important that it is done in a timely fashion. I hope that that answers the hon. Gentleman’s question.
Jo Swinson: I thought that the hon. Gentleman was primed to ask something else, but I seem to have satisfied him on that front, which is delightful. I hope that I have also satisfied the rest of the Committee and that the hon. Member for Edinburgh South can withdraw the amendment.
‘(d) any finding that an investigation should be referred to the Office of Fair Trading on the basis that a large retailer is believed to have engaged in anti-competitive practices.’.
Clause 5 is incredibly important. We are trying to find a mechanism that would allow the adjudicator to pass on to the Office of Fair Trading any appropriate evidence or findings relating to anti-competitive practices, which the adjudicator cannot investigate or enforce under their remit. The Groceries (Supply Chain Practices) Market Investigation Order 2009 was created following a Competition Commission inquiry and investigation, and the decision to implement remedies, including the groceries supply code of practice—GSCOP—was based on the existing supermarkets code of practice.
The competition authorities have held two major inquiries into the groceries market. The first, by the OFT in 2000, led to the creation of the code of practice to regulate the relationship between the largest supermarkets and their suppliers. In 2006, the OFT referred the market to the Competition Commission, which concluded its inquiry in April 2008. At that time, the Competition Commission said that
“the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers”.
That is the thrust of the amendment, which seeks to give the adjudicator the ability to pass information on to the OFT or, as it will be once the Enterprise and Regulatory Reform Bill becomes law, the competition and markets authority.
Open and vigorous competition is good for consumers, because it results in lower prices, new products of a better quality and more choice. It is also good for fair-dealing businesses, which flourish when markets are competitive. That is something that we have missed in our deliberations so far. If we are able to get the Bill correct, it will also benefit large retailers in the long run, since better supply chains create better innovation, better innovation creates better products, better products create happy consumers and happy consumers allow the tills to continue to ring.
Some of the supermarkets or large retailers do have good supply chain practices. The British Retail Consortium, which we met to discuss the Bill at great length, told us that many large retailers had put in place very robust procedures to deal with the groceries code. We want to ensure that those good practices are also rewarded. That is something that we need to bear in mind. This is not just about suppliers but about rewarding good and responsible retailers.
We do have to bear it in mind that the size, scale and scope of the large retailers could, whether through design or accident, become anti-competitive. The adjudicator will not be able to deal with those particular issues, but will be immersed in some of the problems around the supply chain, pricing and that relationship between the large retailers and the supply chain. The adjudicator may, in the course of an investigation, reveal problems in the way that the retail market operates that have to be referred to the OFT or the Competition Commission, as they could be classed as anti-competitive. The OFT has a vast range of powers to deal with such issues.
It should probably read “or a collection of retailers”. That would allow the issue to be dealt with quickly. The adjudicator would then have the power, as legislated, to investigate breaches of the code, but it would also allow the adjudicator to say, “There has been a breach of the code. We have dealt with the retailer in the appropriate manner according to the remedies available, we have asked for actions to be taken and perhaps changes to the relationship with the supplier and have provided reasons for the findings and actions that we have proposed.” In addition, the adjudicator should include in that report, “Incidentally, we have found through the course of our investigations that the OFT and the Competition Commission should look at various aspects of the relationship between the supermarkets or retailers and the supply chain.” It could also add anything it may find that may be anti-competitive by drawing on knowledge gained through investigations.
The adjudicator will be set up almost to be the eyes and ears of the supply chain in the large retailing industry. That is why we were quite keen for the adjudicator to have that knowledge base—that extensive, in-depth knowledge—of the industry. If the adjudicator’s office is working in that fashion, and we hope it works well, it will have an insight into what is happening with the large retailers and there should be a mechanism when dealing with the reporting of that to be able to ensure that the OFT is aware of the issues.
Huw Irranca-Davies: May I suggest a parallel to my hon. Friend? It is not a direct parallel, but it is helpful to look at the Gangmasters Licensing Authority, which very often through its in-depth knowledge of its sectors of forestry, farming and fisheries will reveal exploitation of workers, human trafficking and serious organised crime. Its ability to refer those matters on to the Home Office, Serious Organised Crime Agency and so on is a massive benefit, thanks to its day-to-day knowledge of the sectors it works in.
Ian Murray: My hon. Friends makes an important point with reference to the GLA. It is the case—this does not take too much of a stretch of the imagination—that if the large retailers told their supply chains that they would not provide contracts to anyone involved with the sorts of things dealt with by the GLA, that could, almost overnight, take away a lot of the exploitation of workers in such circumstances. As the adjudicator will be looking at the industry on a day-to-day basis, there may be other forms of referral that they could make. The amendment mentions recommendations to the Office of Fair Trading, but it could be a recommendation to the GLA or other bodies that deal with relationships with suppliers.
This approach works: the Office of Fair Trading has imposed fines totalling nearly £50 million on the UK’s leading supermarket chains and its most prominent dairy processors after finding them guilty of price fixing. To look at three instances of anti-competitive behaviour, the OFT has rebuked each of the large supermarkets—Tesco, Asda and Sainsbury’s—as well as the old Safeway brand and the dairy giants Robert Wiseman, Dairy Crest, the Cheese Company and McLelland on price fixing.
In the past, then, the Office of Fair Trading has undertaken investigations of supermarkets for anti-competitive behaviour. Such anti-competitive behaviour
Jo Swinson: The amendment is interesting; as the hon. Gentleman has just outlined, it requires the adjudicator to include in their investigation reports any findings that an investigation should be referred to the OFT on the basis that a large retailer may have engaged in anti-competitive practices. I fully agree that we should not tolerate anti-competitive activity. Knowingly engaging in anti-competitive practices such as price fixing or abuse of a dominant position is illegal under civil law and, in the case of hardcore cartels, may also be a criminal offence. The OFT is, of course, vigilant in its efforts to stamp out that sort of activity.
However, it is important to come back to what the adjudicator’s particular role and remit are. They will not be investigating not breaches of the Competition Act 1998 but breaches of the groceries code. The adjudicator’s functions, resources and expertise will all be fitted to the enforcement of that code, not to the wider issues of competition law. The hon. Member for Edinburgh South said that we should also be recognising, rewarding and applauding good practice and proper behaviour. It would be somewhat unfair to suggest that there is evidence of a breach of the Competition Act by large retailers, because the Competition Commission’s report on the sector found absolutely no evidence to that end.
Neil Parish (Tiverton and Honiton) (Con): Most of us on both sides of the House want the groceries code adjudicator to help change how the whole system works. Surely, therefore, anything we can do to make sure that the adjudicator passes on information to the Office of Fair Trading to highlight bad practice has got to be good. I feel we are getting ourselves a little bogged down in the legalities; I know that we need legalities, but the Minister could perhaps take a slightly broader approach.
Jo Swinson: I understand what my hon. Friend is saying, but it is important that this measure is very focused. One of the reasons why we have broad agreement—not just cross-party agreement within this House but agreement across a wide range of stakeholders—is that we are dealing with a very specific consumer detriment, which is created by some of the relationships and the behaviours between the large supermarkets and their suppliers, as the Competition Commission report found. That detriment is what GSCOP and, ultimately, the code were put in place to deal with, and those arrangements are what we want to enforce through the adjudicator. When we start to try to expand the remit and go away from that focus, we run the risk of breaking some of the wide consensus on the issue. We also risk sending the wrong message, and suggesting that there is evidence of problems that are not actually there when we look at the facts.
Andy Sawford (Corby) (Lab/Co-op): In supporting the hon. Member for Tiverton and Honiton, I must say that, as I read it the amendment does not fundamentally redefine the role of the adjudicator, which remains specifically in relation to the groceries code. Rather, it would enhance the role in a way that is helpful and will give greater confidence to consumers, farmers, and all those who have high hopes for the role of the adjudicator. It is similar to our roles as Members of Parliament— I am learning that the issues I choose to refer to other authorities do not all fall within the scope of Parliament, but I seek to give some assistance where I find cause, as I am sure the adjudicator will wish to. That is the purpose of the amendment, and I urge the hon. Lady to listen to the wisdom of her own Back Benchers and accept the amendment.
Jo Swinson: I thank the hon. Gentleman for his intervention. He makes a good case that the adjudicator will have much wisdom to impart; indeed, there will be nothing to preclude them including something in their report. However, clause 5(2) states:
We could add to that list—we could add that it must also include any finding that a retailer should be referred on the basis of fraud or criminal activity. There is an endless list of things we could add that must be reported, but we should trust in the discretion of the adjudicator to know what is relevant to their report. Therefore, the specifics that we have said must be included are the findings, the actions and the reasons. Those are the absolute essentials. There is nothing to stop an adjudicator including further information they believe will be helpful.
As I have said, there is no evidence that such anti-competitive practice is going on, so it is highly unlikely that the adjudicator would, for example, discover that a cartel was operating. However, in the unlikely event that they did discover something of that nature, of course they would disclose the information to the competition authorities as a matter of course, just as they would if they found any evidence of fraud, bribery, or any other activity, or anything that was criminal in nature. Any public-spirited person would do the same if they found any evidence of something that needed to be brought to the attention of the relevant authorities.
Indeed, I can make a public service announcement to the Committee right now— the OFT operates a cartel hotline for that very purpose. If anybody here has any evidence of any cartel activity, they can call 0800 085 1664, or, alternatively, email firstname.lastname@example.org. I would make the point that, if such—[ Interruption. ] The hon. Member for Edinburgh South said from a sedentary position said that there should be more than one cartel hotline, and I felt that that was too good not to end up in the record of the Committee’s proceedings, so I credit him with that line. Or perhaps it was the hon. Member for Vale of Clwyd.
It is also worth pointing out that, should such information be found, I am sure we would not want the adjudicator to wait until they had finished their investigation and published their report before passing on that information
Andy Sawford: The Minister makes a very important point about how widely available the contact details for the Office of Fair Trading are, and how she would encourage the public to use that important body. However, will she acknowledge that the adjudicator may not be expected just to call the public telephone line? By virtue of their expertise and the position they hold, they may have an acknowledged role in referring complaints on, which is all that the amendment allows for.
It was mentioned earlier that the groceries code adjudicator may be in the same building as the Office of Fair Trading, and so may not even have to pick up the phone to make such a report. I return to my point that such an occurrence is pretty unlikely. Of course they are entirely able to pass on this kind of information, but that is different from an obligation to report the information. It is highly likely that if they did come across something—given that it would be very unlikely and would therefore be quite an intense issue—it would be included; however, the OFT might want to investigate the matter and not want it to be made public before it concluded its investigation. There may be other unintended consequences to including such a provision.
Ian Murray: I fully appreciate that this may be extending the scope of the adjudicator into areas that they may not want to look at, but in this case is not prevention better than cure? Having such a provision on the face of the Bill says to the supermarkets, “Okay, there’s no anti-competitive behaviour going on at the moment”—as the Competition Commission’s extensive report says—“but actually, there may be something in the future, and the adjudicator can look at that and report on it.” Why do we not have the carrot in this case, rather than the stick?
Jo Swinson: The hon. Gentleman also tries valiantly, but I remain unconvinced. The same argument could be applied to fraud, bribery or anything else, and we could end up with a big Christmas tree of things that would have to be in the adjudicator’s report. We should remember what the purpose of the report is: in the same way as the Government want to strengthen corporate reporting, we want to make sure that when the adjudicator publishes reports, the information is clear, focused and to the point. If there is information that the adjudicator believes should be included, they are absolutely permitted to include it, but I think being too prescriptive risks having a report that is unwieldy and less accessible to the public because of copious additional sections. I know
Huw Irranca-Davies: May I invite the Minister at least to encourage the adjudicator to take a positive approach to any infringement, whether of competition law or any other form of law, in their live reporting of that incident, rather than to be blinkered? I know she wants, quite rightly, to ensure the independence of the adjudicator, but she is using words such as “may”, “could”, “should”, “perhaps” and so on. I would like to hear the Minister say, “We want this adjudicator, where they see any infringements, illegality, or bad practice, to report that and take positive action on it.”
Jo Swinson: I am happy to give that assurance. If the adjudicator finds any evidence of illegality or of any practice that needs to be reported to the authorities, I want the adjudicator to do so. I would say that not just to the adjudicator, but to any member of this Committee and to any person within the public realm. Where an infringement, a crime, or an offence has been committed, it is absolutely right to report it. We all have a moral duty to do that. I am delighted that through this Committee and the no doubt wide readership of its proceedings, the cartels hotline, for example, will be brought to a wider audience. People will know that it exists and that, whether they are the adjudicator or not, they will be able to report any such infringements.
Ian Murray: The Minister says we could end up with a “Christmas tree” of recommendations or referrals, but I cannot see why there would be a difficulty in the report having a section dealing with the questions: has the adjudicator any grounds to refer to another body, or has the adjudicator referred any of these grounds to another body? That would seem a fairly simple and short paragraph, and the adjudicator could refer at the time, or indeed could make the referral after the report had been produced.
Jo Swinson: The hon. Gentleman makes his point and it could be in there. My point is that there should be discretion for the adjudicator to decide what is in the report beyond the specific information that we need regarding their role of enforcing the code. That is what their primary function is and that is what the report should primarily discuss, but if, for reasons that are clear to the adjudicator, they would like to have more in their report, the freedom is certainly there for them to do so.
It is important to focus on the report and what the adjudicator’s role is. It is not their job to look for competition law breaches. Yes, if they come across them, they should, just like anyone else would, make sure that the relevant authorities know, but that is not their job. We would also run the risk of creating an expectation that they would be doing so. If the amendment were made, we might have the perverse outcome that, a groceries code investigation having taken place in which nothing was found and mentioned in the report, a clean bill of health might be given, when actually the adjudicator did not have the specific expertise, was not looking for a
There are many reasons to resist the amendment. It would send the wrong message—it would imply that we think breaches happening. It would do an injustice to retailers if we implied that Parliament thought they were breaking the Competition Act 1998 when that is not actually the case, so I hope that the hon. Gentleman will withdraw his amendment.
Ian Murray: We have had a lengthy debate on a probing amendment. If the adjudicator is the eyes and ears of the public in the retail sector and the supply chain, and he or she comes across anything that they feel should be referred, it is important that they do so immediately, just as I would hope that if they came across a circumstance of workers’ exploitation and modern-day slavery, they would report that immediately to the Gangmasters Licensing Authority. There is no reason why such a referral could not be included in the report. It would highlight and be transparent about some of the practices that may or may not be going on. I do not think it is scaremongering to suggest that any referrals to the Office of Fair Trading should be in the report. There are no anti-competitive practices that we are aware of in the retail sector at the moment, but there might be in future, and it would be useful to have the provision in the Bill. However, given that the Minister’s good mood is still holding high, I will not press the amendment and beg to ask leave to withdraw it.
‘(2A) If the Adjudicator determines that a recommendation has not been, or is not being, followed, the Adjudicator may issue a requirement notice to the large retailer in which the Adjudicator may set out one or more recommendations with which the large retailer must comply. Such requirement notice may in the Adjudicator’s discretion contain a time period for compliance and an indication of which other form of enforcement the Adjudicator envisages might be imposed in the event of continued non-compliance.’.
As I have an Adjournment debate in Westminster Hall at 4 o’clock, I need to be brief—I am sure hon. Members present are greatly relieved to hear that—so I will not be taking any interventions, in case anyone wants to have a laugh. I can assure the Committee that the amendment is probing.
In a sense, the amendment reflects back to the debate that we had on the strength of recommendations and the capacity to escalate from recommendations, rather than end up in a cul-de-sac of recommendations with
As we debated earlier, I entirely recognise that on some occasions where there has been an identified breach for which a recommendation is appropriate, it will be entirely appropriate for the retailer to propose an alternative resolution to the breach, rather than follow to the letter the adjudicator’s recommendation. As I said, the amendment is a probing one, on which the Minister might like to reflect as a way to address what I think might be a weakness in the current arrangements for managing recommendations in the way we debated under clause 4.
Huw Irranca-Davies: I support at least the spirit of the amendment, particularly as it deals with compliance within a set period of time. Had I intervened on the hon. Gentleman, I would perhaps have probed him on what he considers to be a reasonable time for compliance. In any case, he was right to make the point.
When we are looking at an efficient supply chain and at genuine grievances from part of that chain, what people will not want is to be hung out to dry as their businesses and livelihoods suffer. Therefore it is wholly reasonable to expect any recommendations to be implemented within a reasonable time frame.
The Minister has full confidence—I agree with her—in the adjudicator’s discretion in so many ways that it should be within that discretion to stipulate the time frame that is reasonable. The adjudicator would not do that completely off their own bat, but would take soundings from stakeholders and come to a measured and considered conclusion. Their ability to make not only recommendations for improvement but a time scale would hold organisations properly to account and give some hope to those who have genuine grievances that they are not being well served by the code that their issues will be resolved within a proper time frame.
Ian Murray: I want to probe my hon. Friend’s probing of the probing amendment. Is it not the case that we do not want to create a situation in which the adjudicator monitors the implementation of the recommendation within a time frame with no end? Having a specific time frame would allow the adjudicator to say, “We will go and examine the issue again after three months,” and give a focus, rather than a scatter-gun approach, which may take up a lot of resources.
Huw Irranca-Davies: I agree entirely. It is not without precedent for those reaching balanced decisions on measures of mitigation in any industrial sector to say, “Here is a reasonable time frame. We expect you to deliver within that period.” That gives certainty. The most hopeless situation is for someone caught in the supply chain to continue to suffer from the grievance that has been raised and investigated and on which recommendations have been made, while the perpetrator says, “We will get round to that as and when we can.” That would be an absolute travesty of the whole spirit of this good Bill.
Another aspect that I would have probed—there is far too much probing going on—is the quite neat idea of asking the adjudicator to propose other forms of
The amendment is reasonable, but I hope that the Minister will say that there is no need for it because she would fully expect the adjudicator to set down time scales by which the recommendations would be put in place. We have had a good debate, and I accept that the hon. Lady wants a light touch taken to such matters, but I am starting to worry a little that the step back taken by the Government might result—without adequate words on record or adequate letters of exchange between the Minister and the adjudicator or without further guidance from the Minister to the adjudicator—in a rather weaker adjudicator than we imagined who does not do what the Minister intended.
The amendment goes to the heart of the problem. If the Minister says that it was not necessary, because she fully intends the Bill’s measures to comply with such provisions, I want that adjudicator to bring forward time scales on all the recommendations. If that proposal were complied with, I shall be happy. However, if she says that it will be left to the discretion of the adjudicator as to whether time scales will be imposed, that would be a worry for stakeholders along the entire supply chain. It will also give large retailers the certainty that they will not be constantly harried in the court of public opinion or be called into the Secretary of State’s office month after month, as they will know that they have to deliver by a certain date.
Andy Sawford: I take my hon. Friend’s point about certainty for large supermarkets, but does he agree that time scales are even more important for small suppliers and others that we want to protect? Large supermarkets have such resources and capacity that longer time frames will not concern them in the same way as they would the small suppliers. That is my primary worry, although I accept what he said about the large retailers.
Huw Irranca-Davies: My hon. Friend makes a good point. The primary worry of the hon. Member for St Ives when he drafted the amendment was the producers in the supply chain. Given the meeting that my hon. Friend the Member for Corby and I had with farmers in his constituency, I know that they would support the spirit and the letter of the amendment, as it gives them certainty. It would not result in heavy-handedness. There could still be a light touch. The proposal would simply mean that, when measures are recommended by the adjudicator, they are delivered in an appropriate time scale. That would be fair and reasonable, and I hope that the Minister will provide certainty. The hon. Member for St Ives has once again probed, and I hope that he will be able to withdraw that probe because he is completely satisfied with the Minister’s reassurances.
Ian Murray: Let me give credit to the hon. Member for St Ives. The amendment is the best that has been tabled to the Bill so far. I wish that he would press it to a Division, but he probably will not. By the time we reach the situation envisaged in clause 7, the retailer has been found guilty of a breach somewhere along the line, so the adjudicator has decided to find a recommendation to remedy the problem.
Let us consider the time scales to which my hon. Friend the Member for Ogmore drew attention. It could be the case that a certain remedy has been put forward in a recommendation by the adjudicator to a retailer. The retailer could decide to ignore it or not act on it, because the contract may be up for renewal or coming to an end. It could be an incredibly profitable part of the contract, and the retailer might say, “I will remedy this, Mr or Mrs Adjudicator, but not for six months, because the contract will be up in any case and the remedy that I put in place will have no detrimental impact on the breach of the code for which I have been found guilty.” We have to ensure that that remedy is put in place. The time-scale issue raised by the amendment is critical.
The hon. Member for Corby is absolutely right: it is also beneficial for the retailers, because it gives them a focus. They can look at a recommendation and act on it immediately, rather than allowing it to drift. The Minister has raised concerns about the adjudicator’s resourcing and not wanting it to be swamped. If the adjudicator has a time frame of three months for a recommendation, at two months the adjudicator could have an update report on what is happening and on that third month decide whether that remedy has been looked at. We must ensure that the recommendations are not open-ended.
The final part of the amendment would allow the adjudicator to give an indication of other forms of enforcement. After the two-month period in my example, they can say, “Unless this is remedied by the third month or by the time this contract comes up for renewal, I will be forced to name and shame, or fine. If I look to escalate this to a fine, I will ensure my recommendation is that it is well in excess of the financial benefit your company is getting through breaching the code.”
The amendment is very important. I appreciate that it is a probing amendment, but I hope the Minister will reflect on it. If the Minister does not provide comfort that the issue will be brought back on Report, I hope that we will all end up in the same Lobby together. I look forward to that.
Jo Swinson: I am cognisant of the fact that my hon. Friend the Member for St Ives has to leave. I hope that I will be able to meet the challenge of ensuring that the Committee is no longer concerned about this issue in the three or four minutes before he has to go. He has a meeting at 4 o’clock.
The amendment is similar to some of the discussions we had this morning, such as the one on amendment 20. Amendment 35 would have the de facto effect of making recommendations binding. As I said this morning, it is important that the enforcers have a range of sanctions. The recommendations are deliberately intended to be the lightest touch of the sanctions that the adjudicator has at their disposal. There are difficulties with making recommendations binding, because they may not be the only way in which compliance can be achieved.
To take another example—we talked about Bob this morning—I will talk about Ian, who is a senior savouries buyer for one of the retailers. He systematically instructed his staff significantly to breach the code on promotions. He did not let his manager know and covered it up. A complaint was raised by a pork pie manufacturer, the retailer was found to be in breach with that promotion and was subject to a heavy fine. Practices around other promotions, however, were generally good where Ian was not leading them. The adjudicator in that case may recommend extra training and mentoring for Ian, but if the retailer thought Ian’s attempts deliberately to cover up the breaches counted as gross misconduct, they might decide to sack him instead. The recommendations for additional training and mentoring could therefore not be implemented, but the overall objective of compliance with the code would be met by what the retailer decided to do. That is another example of how the adjudicator cannot always know best about how retailers can right the situation. Making recommendations makes sense, but making those binding could lead to a perverse situation if other ways of complying with the code are employed.
The Chair: Order. I am acutely aware that the hon. Member for St Ives has a time scale problem. It just so happens that the amendment is in his name. It would be helpful if he indicated whether he wants to withdraw the amendment. I have to remind the Committee that the amendment, having been moved, is now the property of the Committee. If he leaves the room, it remains the property of the Committee and another Member may press it to a vote.
Andrew George: I am grateful to you, Sir Roger, for that instruction. I was going to leave it in the gift of my hon. Friend the Minister as to whether she felt that I would be satisfied with her response. I have absolute confidence in her ability to make that particular judgement. It was not my intention, as I made clear earlier, to press the amendment to a Division, but to advance it as a probing amendment with the possibility that we may be able to come back to it at a later stage. There was no intention to be discourteous to Sir Roger or the Committee, but I will leave in one moment.
I was seeking to intervene, as I wished to ask the Minister why, if the adjudicator can make recommendations which relate to a particular individual, and that individual is sacked, what difference does it make if that recommendation comes with a time scale? The individual has been sacked.
The adjudicator absolutely will have the discretion to be able to do that, and I accept that it is something which could be helpful. I remind the hon. Gentleman that we had a debate this morning on schedule 1 in which we discussed the possibility of pre-appointment scrutiny for the adjudicator. One of the criteria we discussed as to why that would be useful, and which was citied by various Opposition Members, was that that would show the independence of the adjudicator from Government. We cannot have an independent adjudicator if Ministers are going to set down in detail, or indeed in the Bill, exactly how they will operate. I am very happy to say that time scales for recommendations could sometimes be helpful, but at the same time I do not want to tie the adjudicator’s hands to suggest either that they must always include time scales, or indeed that that is a ministerial direction, because they need to be able to get on with the job themselves.
Huw Irranca-Davies: I must have been such an interfering busybody as a Minister. I would not suggest that we interfere in any way with the independence of an adjudicator, regulator or anybody else, but I would invite the Minister to go further and to put on record that wherever appropriate it would be preferable for a time scale to be included. It is not giving undue direction to the adjudicator: it is saying that where it is logical, and where it is clear that a timetable could be put in place—it would not be binding, because the adjudicator is still independent—consideration should be given to such a measure wherever possible, because it gives certainty.
Jo Swinson: As I said a few moments ago, the inclusion of time frames in recommendations could certainly be helpful for suppliers and retailers alike, because it would help to manage expectations and set out what the adjudicator felt would be reasonable. I think we are slightly dancing on the head of a pin. I can see that it would be reasonable, but I do not want unduly to force the adjudicator to do that, because equally I can imagine that there will be circumstances in which, for whatever reason, the adjudicator takes the view that it does not make sense to set out time frames.
I am sure that whoever ultimately becomes the adjudicator is following our proceedings closely and will hear, not just what I said, but what the hon. Gentleman and other members of the Committee have said on this particular issue. We deliberately drafted the Bill to require the adjudicator to set out how they will operate in the guidance that they introduce, and that may well be something that they choose to take a view on in that guidance. In the process of developing that guidance, with stakeholders sending in their views, I am
I dealt with escalation in the earlier debates but, with regard to the point that the hon. Gentleman made on time frames, I want to deal with a situation in which a supplier continues to suffer as a result of non-compliance with the code, and compliance is not enforced quickly enough. I accept that there has been a reluctance to enforce the code through contract law because of a climate of fear, but when the adjudicator is up and running and undertaking investigations, if they undertake an investigation and rule in favour of a supplier, that climate may be slightly lessened. If the supplier seeks redress that will still be a separate legal process—the adjudicator enforces the code; they do not give redress through their investigations—but a finding by the adjudicator would help to strengthen a case taken through the legal route. The supplier may have other options that enable them to seek redress, and by actively pursuing them they may create an incentive for the retailer to comply more swiftly with recommendations and to ensure that it is compliant with the code.
Huw Irranca-Davies: That is a helpful explanation. Has the Minister had, or would she seek from her team of experts, any advice on whether laying out the what-if scenario, the escalation scenario and other possible measures that could be used would reduce the risk of challenge from a large retailer? If the adjudicator says clearly to the retailer, with advance notice, what a reasonable timetable is on which to comply and, if it fails to do so, what will be coming down the line, does that reduce the risk of challenges—legal or otherwise—to the adjudicator’s decision by laying down a path of escalation should there not be compliance straight away?
Jo Swinson: That is a hypothetical situation, and it is right that we consider all potential situations. In terms of the risk of challenge, the hon. Gentleman will be aware that if recommendations are used, or the naming and shaming enforcement power, there will not be the full merits right of appeal; instead, it will be open only to judicial review. That is much narrower in the scope of the ability for challenge. If recommendations were attached to a fine—that could happen because the adjudicator can undertake more than one sanction at the same time—that would potentially leave them open to challenge. However, they will be required to set out, in guidance, how they will deal with those situations. We will have to wait to see how it will operate as it is slightly hypothetical at this stage.
Huw Irranca-Davies: Very often in Committees we deal with the hypothetical in order to explore these situations. I can imagine a situation where an initial set of recommendations could be laid out by the adjudicator that say, “Should you not comply with this, be aware that financial penalties are coming down the track.” On that basis, the large retailer would have been forewarned, and I imagine that advice from the Minister’s legal office would be that forewarning mitigates the risk of a successful challenge against the adjudicator because of that forewarning; they were given an alternative. Before
Obviously, the specifics of how the adjudicator wishes to set that out in guidance is for them to decide, but that power is clearly there. Legal advice or otherwise, it stands to reason that if a retailer is faced with a recommendation when it has been found guilty, and there is an action that it can take to comply but it knows that fines or naming and shaming are powers that the adjudicator retains, and if it does not follow the recommendation, it potentially runs the risk of being exposed to those fines, there is the incentive to comply with the recommendations.
I hope I have satisfied my hon. Friend the Member for St Ives. I am fairly confident that I have. I am sure he will confirm that when he reads the Committee’s proceedings; however he did intimate earlier that he was happy to withdraw the amendment.
Peter Luff (Mid Worcestershire) (Con): Having had the pleasure of working with my hon. Friend the Member for St. Ives on the Agriculture Committee over 10 years ago, I am well qualified to read his mind. I also heard his words and I would like permission to withdraw the amendment.
‘(d) where it is to be published.’.
We are now moving at breakneck speed through the Bill as we get to clause 8. This is a very straightforward amendment that seeks to make it clear to the large retailer that when the adjudicator puts forward a punishment of naming and shaming the adjudicator can ensure that the punishment fits the crime, and is able to specify where those naming and shaming advertisements or publications should go. Naming and shaming is an important tool, now that the ability to fine will be on the face of the Bill. Naming and shaming will allow the adjudicator to make recommendations but then escalate the matter It should be an effective deterrent, but it must be a proper deterrent. We could be in a situation whereby, according to the Bill, the
Let us bear in mind throughout the debate on the following clauses that the retailer has already been found guilty in one fashion or another, and so, looking at the remedies that will be put in place, we set aside the fact that the large retailer may not have been guilty or had inadvertently breached the code. I can see a situation whereby the adjudicator finds a large retailer guilty and says, “We will name and shame”. The wronged supplier could be Bob, it could be Ian, or any of the other hypothetical circumstances we have heard today. The adjudicator says, “You have breached the code, and therefore you will publish the breach on your own company website or on page 134 of your annual report.” That, in terms of natural justice, would seem slightly inappropriate for the breach that had occurred. What would stop the retailer from publishing the naming and shaming in the trade magazine, which will not really have any effect on the retailer? Or indeed let us imagine—a bit like “Have I got News For You”—the naming and shaming being published in some other publication related to the industry, but which has a very small circulation––page 17 of Tea Cosies Monthly perhaps. I know the hon. Member for Sherwood raised this on Second Reading to make sure that the remedy in place is indeed a punishment that fits the crime. Therefore, our amendment seeks to give the adjudicator the power to determine where it is to be published.
It could be that the retailer would have to pick up the costs of publication on page 7 of a Sunday newspaper with a large circulation. The adjudicator may suggest that the breach is so severe that, rather than moving to a fine, they would prefer the retailer to place a very prominent advert with regard to the breach in a newspaper or publication with a circulation of a certain size. That would allow for the retailer to be properly named and shamed. The only way naming and shaming will work as a proper punishment is if the supermarket feels that its reputation may be damaged by taking a course of action with a supplier that breaches the code.
This is a very straightforward amendment that the adjudicator may or may not use, but there may be severe circumstances when the adjudicator says, “Yes, there has been a breach and yes, we will take this forward to a certain size of circulation and a certain publication.” I hope that the Minister will support this sensible, straightforward, beautiful and simple amendment.
David Simpson (Upper Bann) (DUP): The Northern Ireland consortium of retailers has indicated that the retailers in this clause should have the full right of appeal for naming and shaming. What is the Member’s view on that?
Ian Murray: That is a good intervention and something that the Minister may want to respond to. The British Retail Consortium raised exactly the same issue. Now that fines are in the Bill, there will have to be a legal mechanism for appealing, because of the financial element.
The adjudicator must have the powers to say to a retailer, “You have breached the code, and that breach is of a severe enough nature for me to escalate this to a naming and shaming. Furthermore, you will not be on page 53 of a regional newspaper that only covers the north-east of Scotland when the breach happened in the south-east of England. I will make sure that you are properly named and shamed in a publication with a circulation that benefits that particular crime.”
Jo Swinson: I thank the hon. Gentleman for the amendment and recognise the intentions behind it. I think we share the objective of making sure that the adjudicator is able effectively to name and shame so that is a real power that will deter retailers from breaking the code and encourage them to behave well. The requirement to publish is an important part of naming and shaming, so making sure that the adjudicator can specify how that is done is important. Where we differ is whether the Bill already achieves that, and I think it does. Clause 8(2)(b) lays out that the publication requirement is imposed by giving written notice to the large retailer specifying how it must be published. That gives the adjudicator the power that the shadow Minister seeks to introduce to decide when, where and in what place the information is published, so that it can be as effective a sanction as possible. He mentioned that we would not want things to be on page 7 of Tea Cosy Monthly or other publications we were unaware of until we watched “Have I Got News For You”. I think his bid to be one of the panellists on that programme has been well heard—we will look forward to his appearance, no doubt.
The information could be published online, in the national trade press, on retailer’s websites or in annual reports, and as he rightly outlined, it will be different depending on what the breach is. The adjudicator is best placed to specify; if it is a very serious breach, it may well be that national newspapers are the right place, or even on the homepage of the retailer’s website. If it is a more minor breach, it may well be that something in specifically trade press would be appropriate, but that is entirely up to the adjudicator to determine. In order to give the Committee some further reassurance on this, I draw attention to paragraph 44 of the explanatory notes on clause 8. It says:
“The Adjudicator will need to inform the retailer in writing of the information required to be published, the manner in which it must be published and the time by which it must be published. For example, the Adjudicator could require publication by press release, through the large retailer’s annual report or website or through a newspaper advertisement. The information could then be taken into account by those dealing with that large retailer in future.”
Ian Murray : I do not want to sound as if we are getting into very detailed semantics, but the word “how” it must be published and indeed the explanatory notes can be read in the way the Minister is kindly giving us,
Jo Swinson: That would certainly be complying if that was what the adjudicator wrote in their letter or e-mail to the retailer. If they said that it must be published in a newspaper, it would be complying with that if they published in the Press and Journal. If they wrote and said it must be published in The Times, The Independent, and the Daily Mail then—
Jo Swinson: Indeed. I do not wish to offend any other newspaper titles by not reading them out, so we will just assume for completeness that it could be any or all of the national newspapers. If those were specified in writing in the notification, obviously publishing it in the Press and Journal would not be compliant with that direction from the adjudicator. This is about the adjudicator having the ability to specify.
There is also the point that was raised by the hon. Member for Upper Bann. As well as the adjudicator having discretion over where the retailer should publish the information, it is important that they would have to be reasonable and proportionate when exercising that discretion. They would need to take into account the facts of the investigation that they have just undertaken, how serious the breach is, and the other issues that the hon. Member for Edinburgh South raised, such as the geographical location of where the breach occurred. That would be something else to take into account when deciding where would be appropriate to require that publication.
Regarding the query raised about the appeal mechanism, I can confirm that the Government do take the view that, although introducing fines would require a full merits right of appeal, these other sanctions would not, and they would retain the judicial review method for challenge, as is in the Bill.
George Eustice (Camborne and Redruth) (Con): One of the points made was that there may be a situation where the adjudicator would insist on a supermarket taking out a paid advert in a newspaper. Will the Minister clarify whether that is something that she envisages, or are we really talking about press releasing it nationally? I would be quite concerned about an adjudicator having a favoured newspaper, such as the Sunday Times, for such adjudications in paid advertisements.
It could well be through an advertisement. There is an advantage to that, as opposed to doing it just through a press release. Often, there is a desire to do that in addition. I am certain that when breaches occur, campaign
The point to make to my hon. Friend the Member for Camborne and Redruth is that it would be noted if, on every occasion, there was one favoured newspaper. I am sure that questions would be asked. We would be encouraging the taking of action in a proportionate and reasonable way, so it might well be that certain publications would be more relevant and appropriate than others. I am sure that the adjudicator would not wish it to look as though they were biased towards a particular type of publication, but would want to show that they had thought carefully about the appropriate ways in which publication should take place.
Huw Irranca-Davies: The Minister is being admirably detailed in her response to the amendment. It seems, from what she is saying, that there will be specification of what information will be published, how it will be published, the time by which it will be published and, according to the interpretation of the explanatory notes, where it could be published as well. I appreciate that specific detail that the Minister has given. Why is this different from the previous discussion that we had? The Minister thought that it would be too prescriptive to articulate a time period for compliance when we were talking about clause 7. What is the difference?
Jo Swinson: I do not think that there is a difference. I said that the adjudicator can mention a time period for compliance if they choose to do so, but that would not always be appropriate, so I would not want to force the adjudicator to do so. It is fair, if they are naming and shaming, that they are clear to the retailer about what it has to do in order to have complied. That is the difference. A recommendation may well not have a time attached to it, but if information is to be published, that clearly does need to have a time attached to it. As I think I mentioned—I appreciate that we slightly disagreed—it may often be helpful to attach a time frame to recommendations, but we want to ensure that there is discretion where that is not necessary.
Jo Swinson: Although the hon. Gentleman tempts me, I think that there is sufficient clarity in the Bill at the moment. The explanatory notes are very clear, and the position is explained. However, I have of course listened to the point that he has made and, as is the case with all the discussions that we have in Committee, I will be happy to reflect on the points that have been raised as we move from Committee to Report.
Ian Murray: I cannot understand why the Minister will not insert the words “and where” if there is some confusion about the Bill. If she is saying that the adjudicator can say to a retailer that has breached the code, “You will publish a newspaper advertisement on Sunday 12 January 2013 in the Kirkintilloch Herald”—
Jo Swinson: I thank the hon. Gentleman for his intervention. He will have heard me tell the hon. Member for Ogmore that I will think about these issues as we head towards Report stage. I think he should be satisfied with that, but we can always return to this discussion on Report if he is still unsatisfied. With that, I encourage him to withdraw the amendment.
‘(c) that it shall be paid within 28 days.’.
‘(7A) The Secretary of State must make the order referred to in subsection (7) within 3 months of the Adjudicator making the recommendation referred to in subsection (8).’.
‘(d) the criteria that the Adjudicator intends to adopt in deciding whether to impose financial penalties under section 9 together with maximum penalty that may be imposed and how the maximum penalty is to be calculated.’.
‘(1) If the Secretary of State thinks that the Adjudicator’s other powers are inadequate; and
(2) has given due regard to the relevant Ministers in the Devolved Administrations.’.
(h) consult with the relevant Minister in the Devolved Administrations.’.
Government amendment 14 has not been selected, because it relates to schedule 3, which the Government intend to withdraw. There is not much point debating an amendment on a provision that will then be immediately withdrawn.
Ian Murray: I move on from a moral victory on an amendment to an actual victory on an amendment. We are absolutely delighted the Government have been able to include fines in the Bill. That is a pretty spectacular U-turn in such a short time, given what the Minister said on Second Reading, and perhaps I can indulge the Committee for a moment by reminding her of what she said. She said she was
“not persuaded that it is necessary to have the fining powers from the start, and I will outline why. I think that the sanctions that are in place and that will be available immediately are robust and will be sufficient to achieve the change we require. The adjudicator will be able to take one or more of three possible measures…If it is deemed necessary, they could then incur financial penalties, if the Secretary of State has granted that power to the adjudicator.”—[Official Report, 19 November 2012; Vol. 553, c. 332-33.]
The fundamental concern about the Bill as it was presented on Second Reading was that the adjudicator would become toothless. As I said at the start of today’s proceedings, we had a reasonable Bill before us, and the other place turned it into a good Bill with the introduction of anonymity and the ability of third parties to take action. We were looking for it to be turned into a great Bill, and now that the ability to fine is in it from day
The Opposition always believed that the adjudicator should have teeth to tackle breaches in the code, which is why we and most other organisations, including Traidcraft, Action Aid and the Food and Drink Federation, all called for the power to fine to be included in the Bill from day one. Perhaps it was the embarrassment of the now Minister of State, Department for Environment, Food and Rural Affairs, the hon. Member for Somerton and Frome, who has responsibility for agriculture and food. We have mentioned him quite a lot this afternoon, and he was an Opposition spokesman in 1999, when he referred to fines, calling for an “ombudsman with teeth”. Well, his wish has come true, because he now has an adjudicator with teeth.
Last year, the hon. Member for Tiverton and Honiton, who is with us, and who has been incredibly helpful and magnanimous about some of our amendments, said in a Westminster Hall debate that he agreed with other Members that
All the organisations that represent suppliers said clearly from the beginning that the only way to give the adjudicator teeth was to allow fines from the beginning. That view was shared by a whole host of bodies related to this part of the Bill. They went to the extreme lengths—because these organisations do not tend to operate in this way—of submitting a letter to The Sunday Telegraph just before Second Reading. They said:
“Having got the Groceries Code Adjudicator Bill this far, the government will be scoring an own goal if it denies the supermarket watchdog the one tool that will make it effective: the power to levy fines from the outset.”
The letter was signed by a cross-section of organisations, including ActionAid UK; the National Farmers Union; the Federation of Small Businesses; the chief executive of the Campaign to Protect Rural England; the National Federation of Women’s Institutes; the chief executive of Traidcraft; the chief executive of the Tenant Farmers Association; the president of the Country Land and Business Association; the chair of the British Independent Fruit Growers Association; the executive director of CAFOD; the executive director of Friends of the Earth; the executive director of War on Want; the director of RedOrange Ltd, an independent retailer that supplies large supermarkets; and a partner in Great Glemham Farms. That is quite a cross-section of organisations that took the time, effort and co-ordination to propose a robust case for including fines in the Bill.
We have always been clear that including fines in the Bill does not mean that fines should be imposed on retailers randomly. Now that fines will be included in the Bill, I hope that the adjudicator will think that that is enough of a deterrent for large retailers not to invoke the power. Allowing the adjudicator to have the power easily to hand may influence the actions of retailers and suppliers, and may go in some way to preventing serious
Clause 9 as it currently stands, notwithstanding the Government amendments that have not yet been made, states that the adjudicator will have the power to fine retailers subject to what would have been the Secretary of State’s permission. At the moment we support the Government amendments in principle, but I will qualify that by saying that we have not been able to analyse in detail the impact of the whole host of amendments that have been tabled, and we will do that and bring the matter back on Report. The reason for our support is that there could be a situation in which a breach of the code was so severe that the adjudicator decided to seek permission from the Secretary of State to remedy the breach through a fine, but the tools to remedy that breach would not be easily at hand, and it might be several months—if not running into 12 months—before the Secretary of State had consulted properly and given them the tools.
Many hon. Members have used the analogy of a football referee refereeing a match. The last defender pulls down the striker. The referee goes to his top pocket to pull out the red card, but all he finds is a set of instructions to ask the Football Association whether he can use the red card. By any stretch of the imagination, the game would be finished—in fact, the football season might have finished—by the time the referee got the ability to use the red card. It seems quite strange that the principle of being able to use the red card is in place, but yet the referee has no ability to use it until such time as a convoluted process has been gone through. It is quite right for the Government to include fines in the Bill, and we welcome that.
We discussed under clause 2 the roles of the BIS and EFRA Committees regarding the pre-appointment hearing of the adjudicator. That proposal was not accepted by the Minister, but the BIS Committee has said that the power to fine
Neil Parish: The EFRA Committee is keen to see fines included in the Bill. We are also keen to see the fines be commensurate with the scale of the offence and the size of the supermarket or perpetrator of the offence. As I have said before, it is no good imposing a small fine on a large company; it will not send the right message. If the right message is sent, hopefully many of the cases will not end up in the hands of the adjudicator.
Ian Murray: That is a very valuable intervention, for which I am incredibly grateful, because the new provisions give the Secretary of State a power to consult on maximum levels of fines. It is important that the adjudicator has a spread of financial penalties available to be able to make sure that the punishment fits the crime, as we have
I will finish with evidence from BIS. If we go back to its consultation publication, “Taking forward the establishment of a body to monitor and enforce compliance with the groceries supply code of practice”—another snappy title for a BIS report—it said that it was more likely that compliance would be forthcoming with the groceries code if fines were available. That was the analysis from BIS back in February 2010. It was an interesting piece of work that shows that naming and shaming is unlikely to achieve the objective of encouraging customers to switch to other supermarkets.
There are only four or five large supermarkets—large retailers—and people get into the habit of using them for the purposes of location, brand or price. It is a very competitive market, so naming and shaming is unlikely to change people’s habits in terms of which supermarkets they use. If all large retailers were named and shamed for a particular practice, there would be very few places left to go. That is why ActionAid said, in its very useful response to the Committee, that it welcomes the inclusion of fines from day one, because naming and shaming is unlikely to achieve the objective, and naming and shaming is more likely to achieve the objective if fines are in the Bill. It also said:
The hon. Member for Tiverton and Honiton asked about the level of fines. A useful piece of work has been done by Traidcraft, which asks the Secretary of State to come back to consult properly on the level of fines and how those will be applied, rather than allow the level of fines to be marginalised. We are absolutely grateful to the Minister for seeing the light. She might have been in an even better mood that day when she decided that fines would be in the Bill, but we want them to be as robust as possible. We will come back to the details on Report.
We support amendment (a), which was tabled by the hon. Member for St Ives. It would reduce the amount of time from six months to three. He is absolutely right to try to put some haste into the process. It is a sensible amendment again from the hon. Gentleman. There is a seat next to us on the Opposition side of the Committee and he is welcome to take it up whenever he wishes.
I will finish with a proper thank you to the Minister for putting fines in the Bill. Many organisations—ActionAid, Traidcraft, the National Farmers Union and others who were involved in the subject—asked the Government to put fines in the Bill. The Minister has
The Chair: Order. It is reasonable to accommodate the hon. Member for St Ives and release him from the Committee to take part in business on the Floor of the House. I understand that, but I do not think it is reasonable for him to walk back in, straight into the middle of the debate, as I am sure he understands.
Andy Sawford: May I start by saying that the Minister should be commended on accepting the strong arguments for the fines? It shows the work of Parliament at its very best when Ministers take on board a good, strong argument that is presented not only in this House, but by a whole range of organisations, some of which my hon. Friend the Member for Edinburgh South mentioned. Those include the National Farmers Union and other well-known stakeholders, and also Unite the Union—of which I am a member and should declare an interest—which has made strong representations in respect of the fines. We should also pay tribute to my hon. Friends, the Opposition Front-Bench team, and to those in the other place who made a strong case for the power to fine consistently at each Reading of the Bill that I have looked over.
The critical thing for my constituents, who have faced rising food prices for the past two years, is to make the right judgment. I was struck by the views of dairy farmers, whom I and my hon. Friend the Member for Ogmore met recently in Corby and east Northamptonshire. They raised their concerns about the way in which the price they receive for providing milk to the industry is being driven down and down. We have to balance the squeeze on the living standards of consumers who walk into Morrisons or other supermarkets and see a pint of milk that is advertised on the telly—four pints for £1, which seems incredible to me—with the need to pay a fair price to farmers.
At the same time, it is important that we do not get into supermarket bashing through the course of the Bill, because we must recognise that supermarkets play an incredibly important role in our economy—certainly in my experience of local supermarkets. I shall be at a local supermarket that is opening on Friday in my constituency. It has taken on 100 long-term unemployed people to work in the newly opened store. That is absolutely fantastic, and it has made a commitment to the local community. There are many things to thank our supermarkets for, but as we balance the needs of consumers, suppliers and supermarkets, and the role that supermarkets play in our economy, we must ensure that we safeguard suppliers effectively. That is why the Bill is incredibly important, and why giving the adjudicator real powers and teeth is so vital.
From the people of Corby and east Northamptonshire, I express heartfelt appreciation to the Minister that she has taken the arguments on board. They will be very pleased, but I hope that, in responding to the points made by my hon. Friend the Member for Edinburgh South, she clearly sets out the position. My understanding
Sheila Gilmore: It restores one’s faith in some of the parliamentary processes to feel that something has changed, because we all spend a great deal of time debating issues on the Floor of the House and in Committee, particularly in opposition. Government Members who were in the previous Parliament obviously experienced lengthy periods in opposition. Sometimes, we look back on spending three hours of an afternoon in a Bill Committee and, when asked, try to answer the question, “What did you achieve?” The answer is usually that we debated amendments, but we did not win votes. To people outside, we seem to spend a lot of time not achieving a lot. It is good for everyone—those who were taking part in the campaign long before the Bill came about and those outside who campaign on other issues—to know that it is possible to effect a change of heart and of mind, and see something come through. That is how it should work. If the Government constantly feel that having put words on paper, they cannot move, we will get bad law, and we all know that bad law is unhelpful.
Licensing of houses in multiple occupation is an important issue in my city, and a small example of a related field in which not getting financial penalties and so on right, can go very wrong. The fine level initially set for breaches of the rules was so low that some landlords said openly that they could save more by not applying for a licence for a year or two until they were caught up with. They were not paying the licence fee and did not have to pay for the safety changes, for example, required to get the licence. It therefore paid them not to apply for the licence until they were caught up with, because the fines were cheaper than doing the right thing.
That is obviously on a different scale, but it shows that it is important to get the penalties right. Although some have expressed concerns that the cost of the fines will simply revert to the consumer in prices, which we will obviously have to watch for, the purpose cannot be to extract maximum fines, as some think government at
Ian Murray: My hon. Friend makes a compelling case on the level of fines. May I take her back to the point about the potential detriment for consumers of higher prices if a fine is too high? Is it not the case that if a supermarket passes on to consumers a fine levied on it, one consequence may be that their customers go somewhere else for a cheaper price? The consequence of the fine for breaching the code is therefore amplified.
Sheila Gilmore: I thank my hon. Friend for that. It is potentially an issue because, although we are dealing with a relatively small number of large retailers, which is one problem in this field, they are competitive and want to retain their position in the market. They would perhaps respond in that way and not wish to pass a penalty on. The main aim is to change behaviour, and ensure that retailers behave as they should behave under the code, which ultimately will be to the benefit of all of us. Let us consider the notion that, if prices are constantly driven down, it is somehow to the consumers’ advantage. That is to ignore the fact that, if our suppliers go out of business, prices might rise in any event. However, we will also have lost employment in this country and all sorts of other benefits that come from our own farming and food production industry.
For many of us as consumers, ultra-cheap prices are sometimes tempting, for example milk, which seems ridiculously cheap. However, if we do not have milk producers in the country, our prices are likely to rise. We should not accept the argument that it is not good to have a punishment. We want retailers to say, “We will not behave badly towards our suppliers”, as a result of which no fines would have to be levied.
The Chair: Order. Just before we adjourn, I want the Committee to understand where we are. Mr Irranca-Davies was about to speak. I shall be in the Chair on Thursday morning and, to be fair to everybody, I propose to call Mr Irranca-Davies and then call the Minister to reply to the bit of the debate that has taken place so far. At that point, Mr George, if you then still wish to move your amendments to amendment 6, we shall be very pleased to hear from you.