Groceries Code Adjudicator Bill [Lords]


The Committee consisted of the following Members:

Chairs: Sir Roger Gale  , Hywel Williams 

Crabb, Stephen (Parliamentary Under-Secretary of State for Wales)  

Danczuk, Simon (Rochdale) (Lab) 

Eustice, George (Camborne and Redruth) (Con) 

George, Andrew (St Ives) (LD) 

Gilmore, Sheila (Edinburgh East) (Lab) 

Hart, Simon (Carmarthen West and South Pembrokeshire) (Con) 

Irranca-Davies, Huw (Ogmore) (Lab) 

Kelly, Chris (Dudley South) (Con) 

Luff, Peter (Mid Worcestershire) (Con) 

Mosley, Stephen (City of Chester) (Con) 

Murray, Ian (Edinburgh South) (Lab) 

Parish, Neil (Tiverton and Honiton) (Con) 

Powell, Lucy (Manchester Central) (Lab/Co-op) 

Ruane, Chris (Vale of Clwyd) (Lab) 

Sawford, Andy (Corby) (Lab/Co-op) 

Simpson, David (Upper Bann) (DUP) 

Spencer, Mr Mark (Sherwood) (Con) 

Swinson, Jo (Parliamentary Under-Secretary of State for Business, Innovation and Skills)  

Uppal, Paul (Wolverhampton South West) (Con) 

Neil Caulfield, Kate Emms, Committee Clerks

† attended the Committee

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Public Bill Committee 

Thursday 13 December 2012  

(Afternoon)  

[Sir Roger Gale in the Chair] 

Groceries Code Adjudicator Bill [Lords]

2 pm 

Ian Murray (Edinburgh South) (Lab):  I beg to move amendment 49, in clause 12, page 4, line 37, at end insert 

‘including appropriate Ministers from the Devolved Administrations.’. 

The Chair:  With this it will be convenient to discuss amendment 54, in clause 15, page 6, line 14, at end insert— 

‘(h) the relevant Ministers of the Devolved Administrations.’.

Ian Murray:  I thought that we were going to debate this clause between just the two of us, Sir Roger. What a good debate that would have been. Welcome back everyone after a short break. 

Amendments 49 and 54, it is no surprise to hear, are straightforward. The Minister’s generosity will certainly be tested with them. Amendment 49 is to clause 12. Where the amendment would be made, it currently reads: 

“Before publishing guidance under this section the Adjudicator must consult any persons he or she thinks appropriate.” 

We understand that that is a fairly wide provision, and it would be useful if it specifically said that the consultation should include the appropriate Ministers from the devolved Administrations. I am not the biggest proponent in this place of the Scottish National party, as you will understand, Sir Roger, but it is important that, given this is a UK-wide Bill, the devolved Administrations of Northern Ireland, Wales and Scotland have the ability to comment on the guidance or to try to influence the adjudicator in the consultation on that guidance, purely because they may have instances that are geographically significant or geographically important to them. 

Amendment 54, which is in the name of my hon. Friend the Member for Ogmore, would include the relevant Ministers in the devolved Administrations in the list of people who would be consulted in the review. On the review, clause 15 currently states: 

“In carrying out a review, the Secretary of State must consult— 

(a) the Adjudicator; 

(b) the Competition Commission; 

(c) the Office of Fair Trading; 

(d) the retailers mentioned in Article 4(1)(a) and (b) of the Groceries Supply Order;”— 

that is the top 10 largest retailers— 

“(e) one or more persons appearing to the Secretary of State to represent the interests of suppliers;” 

“(f) one or more persons appearing to the Secretary of State to represent the interests of consumers”— 

which both seem sensible—and 

“(g) any other person the Secretary of State thinks appropriate.” 

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Clause 15(7)(g) is wide enough to cover the devolved Administrations, but it is important that the relevant Ministers in the devolved Administrations are mentioned specifically in the report, so they can have an input into the review process and the published guidance. 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson):  I am sure it would have been a delightful debate, had it just been the hon. Gentleman and yourself, Sir Roger, but I am none the less pleased that we have a much fuller complement this afternoon, although it is not an entirely full complement. 

I thank the hon. Gentleman for his amendments. As the Committee will be aware, both he and I have a particular interest in matters north of the border, because we are both MPs for Scottish constituencies. I think we would all agree that it is important that the devolved Administrations are adequately consulted where that is appropriate. 

I want to put it on record that we are very grateful for the support that we have had in dealings with the devolved Administrations as we have come forward with the Bill. We have been looking at this issue for some time, because, as hon. Members will be aware, it was a draft Bill in the first Session of this Parliament. Officials have been in regular contact—roughly monthly—with officials from the devolved Administrations. We gave evidence to the Northern Ireland Assembly Committee on the issue. The Scottish Government confirmed earlier this year that no legislative consent motion is needed. We have certainly involved them at the stages of the Bill’s development. At ministerial level, we have had a formal write round on more than one occasion to ensure that they are well abreast of what we are doing. 

The amendments raise an important point, but there is a difference between whether it is important to consult and whether it should be a statutory duty, with devolved Administrations named on the face of the Bill. I would reject that part of the approach because the groceries code is a non-devolved issue, as it is about competition law, and that matter is reserved. Therefore, the adjudicator has no formal responsibilities to the devolved Administrations. In that case, a statutory duty to report to such bodies would not be appropriate and could muddy the waters around the adjudicator’s role. It could suggest, for example, that the devolved Administrations had some kind of oversight role for the adjudicator, when they do not have powers to control either the code or the adjudicator. 

I hope that the Committee is reassured and satisfied that the adjudicator will work closely with the devolved Administrations where appropriate, considering their interests carefully. The Government’s approach up to this point helps set the tone for that engagement, which we would expect the adjudicator to continue. As the hon. Gentleman said, the drafting as it stands allows both the Secretary of State and the adjudicator to consult any other person thought appropriate. It would be natural that that would include the devolved Administrations, so that their views could be considered under the provision. Specific requirements to consult them are unnecessary, and because of the issues on devolution and reserved matters that I have mentioned, it would not be appropriate to include such requirements in the Bill, in primary legislation. I hope the amendment was offered in a probing spirit, aimed to make sure that

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the devolved Administrations are to be involved, as they have been up to this point, without the formality of a statutory duty. 

Ian Murray:  These were indeed probing amendments, for the simple reason that the Scottish Government in particular do not have a track record at the moment of consulting other organisations, even when they say they have, whether that be this place, the European Union, or the Bank of England Monetary Policy Committee. I thought it was important to make sure that the devolved Administrations had been involved in the process, and that that was on the record. I take reassurance from the fact that, as I said, the Bill gives the Secretary of State power to consult the devolved Administrations, both on the guidance and on the review process. I hope that the message to the Secretary of State from this short debate is that we hope the devolved Administrations are involved. Given the Minister’s reassurances, I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Amendment made: 10, in clause 12, page 4, line 39, leave out ‘and (c)’ and insert ‘, (c) and (d)’.—(Jo Swinson.)  

Ian Murray:  I beg to move amendment 50, in clause 12, page 4, line 39, leave out ‘6’ and insert ‘3’. 

This is a straightforward amendment. We had a long debate on Second Reading about the haste with which we wish to see the legislation getting Royal Assent and appearing on the statute book. I had a wholesome discussion with the hon. Member for St Ives—prior to my complimenting him on his lifetime’s work of getting the Bill this far—on whether it was the previous Government or this Government who were responsible for that delay. I am glad that we are now in a position to be able to take the Bill forward after it has come from the other place. 

The amendment’s purpose is to reduce the amount of time that it will take the adjudicator to bring forward the guidance from six to three months. I appreciate that in today’s earlier debate, the Minister suggested that the guidance for fines was at six months because there may be a general election—on this side of the House, we hope that that happens sooner rather than later, if the coalition decides that its marriage of convenience needs to collapse. If the time for getting the guidance together was changed to three months, a greater focus would be given to the adjudicator and all the bodies that would be involved in bringing the guidance together, so that we could try to get the adjudicator up and running as quickly as possible. Therefore, the purpose of this probing amendment is to get reassurance that the work will be done quickly. 

Jo Swinson:  I think the intention of all parties is to make sure that the adjudicator is up and running and able to discharge their duties without delay. We all want to see that. The hon. Gentleman said that we want to see this matter proceed with haste. That is fair. However, it is important that we do not do so hastily, if I can make that distinction. That is why I reject his amendment to shorten the period in which the adjudicator has to publish their guidance from six months to three months. Three months is an overly ambitious period if the adjudicator is to be thorough in their consultation on what should go into the guidance. The guidance will be an important piece of information for all the parties

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involved, whether they are retailers, suppliers or even, as mentioned in previous discussions, interested members of the public. We need to make sure that it is absolutely right if it is to be the cornerstone of subsequent investigations. 

Public consultations typically last between 10 and 12 weeks, although the Government’s guidance shows that if there has already been extensive consultation or there are extenuating circumstances, consultations can have a shorter time scale than that. A wide range of issues will be considered in the guidance that the adjudicator publishes, therefore we want it to have the full amount of time for public consultation. If a consultation lasted for 10 to 12 weeks, the amendment’s three-month time scale would be overly restrictive. Time is needed to draw up the consultation guidance, to review what has been sent in and to create the finalised guidance for publication at the end of the consultation. A six-month time scale allows some weeks before the consultation to draw up the guidance. It allows time for a thorough consultation, and to bring forward the finalised guidance. A three-month time scale would not allow that. 

It would be a shame if the adjudicator’s guidance was unworkable or ineffective as a result of undue hastiness. I therefore encourage the hon. Gentleman to withdraw his amendment. Let us make sure that this proceeds with haste, but not in a hasty manner. 

Ian Murray:  I appreciate the Minister’s comments. We want haste, but we do not want to be hasty. That is good terminology. I want to draw a parallel with the shares for rights proposal in clause 23 of the Growth and Infrastructure Bill, which will be before the House for Third Reading and Report stage on Monday. It was announced by the Chancellor at the Conservative party conference, there were six weeks of consultation and a major piece of legislation appeared not long afterwards. The Minister says she wants this to come forward in a proper fashion to get it right. The unworkable nature of the shares for rights clause in that Bill shows that the Minister is right. We do not want to just pick an idea off the shelf, hastily put it together and make something, in her words, unworkable. 

I will not press the amendment. I am reassured that six months is about right. I do not think the Minister said that six months would be the maximum, so there would be nothing to stop the adjudicator from publishing the guidance sooner, if that is the case. 

Jo Swinson:  The hon. Gentleman is absolutely right. The adjudicator must publish guidance within six months. If the adjudicator felt that proper consultation had happened, there would be nothing to stop their publishing earlier. The clause gives the adjudicator the opportunity to use that six months if it is needed. 

Ian Murray:  I am delighted for that clarification and reassurance. I hope that the adjudicator, the Secretary of State, the Minister and everyone involved in this process will take on board the will of the entire House. We want this to happen as quickly as possible. Perhaps that six month maximum could be reduced if the Government are able to put together in a proper fashion a shorter, more sensible time frame. On that basis, I beg leave of the Committee to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Clause 12, as amended, ordered to stand part of the Bill.  

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Clause 13 

Recommendations to Office of Fair Trading 

Andrew George (St Ives) (LD):  I beg to move amendment 16, in clause 13, page 5, line 3, at end add— 

‘(2) In considering such changes, the Adjudicator shall review the territorial extent of the Groceries Code, especially in relation to the activities of large retailers outside the United Kingdom, such activities to include supplier trading practices and activities undertaken by the subsidiaries of large retailers.’.

This amendment ought to be debated alongside amendment 40, which we debated with clause 4. In some sense, it is a pity that the amendment cannot be debated again in the context of extending the scope of the adjudicator’s responsibility to overview changes to and powers in the code to the order. 

2.15 pm 

Amendment 16 would expand the scope of who has to comply with the code. I have raised the issue in the debates on amendments to clause 4. It is inevitable that over time, retailers will look at the regulations that apply to them and seek to evolve their supply chains to adapt to the circumstances that they find themselves in; it is, I suppose, the equivalent of tax avoidance. It is necessary for the adjudicator to be able to update who needs to abide by the code. It is also necessary for the adjudicator not to be caught in the straitjacket of dealing merely with the relationship between a final supplier and a supermarket. If the final supplier is effectively a subsidiary or company that has been set up by the supermarket in order to keep the supermarket’s own hands clean from how the subsidiary behaves, either in the country in which the supermarket is purchasing its food supply or in this country, that can rather undermine the very spirit of what the adjudicator is attempting to achieve. 

The extraterritorial action of retailers need to be included; I have mentioned Asda’s subsidiary, IPL, and Tesco has an internal department called Group Food Sourcing. Sainsbury’s has independent companies such as Chingford that source products for and sell only to it. Fortunately, the order will contain a definition of buyer, which will, hopefully, include such entities, and I hope that the Minister will confirm that that is the case; the purpose of the amendment is to probe the issue. The adjudicator needs to be able to recommend new entity organisations to abide by the code. 

Previously, some retailers would source from two or many more suppliers and therefore negotiate with a number of suppliers; for example, if retailer X used to source apples from suppliers A, B and C. Now, however, in many circumstances, it appears that retailers have set up subsidiaries to do that for them. When retailers outsource 100% the purchasing of a particular product, it is the supplier that sources on behalf of the retailer. That supplier now has the possibility to abuse buyer power by sourcing all the retailer’s requirements under the cloak of being a separate company. Such companies need to be included within the scope of the code. I hope that my hon. Friend the Minister agrees and will reassure me that mechanisms are available to avoid such attempts by supermarkets to avoid their responsibilities under the code, which I am sure will happen. 

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Ian Murray:  The hon. Gentleman will not be surprised to hear that we support his important amendment. I am disappointed that he has tabled it merely as a probing amendment, because it gets to the heart of some of the issues that are still outstanding in the Bill. We are pleased that third parties’ anonymity is now in the Bill, but we need to deal with the intermediaries and the setting up of subsidiaries by the major supermarkets. There is a strong international perspective and the adjudicator has to have the powers to be able to look at that. The territorial extent of the Bill needs to at least be kept under review to enable some of the issues to be resolved. 

Perhaps the Minister has the figures for the UK supermarkets; I do not know what proportion of their buying is overseas. I imagine that at certain times of the year they import a substantial amount of the goods that we buy in the shops. The code itself came from the Competition Commission report in 2008, which stated that large retailers were known for transferring excessive risk to suppliers. Such risk is amplified for a third party in a developing country. ActionAid has been vociferous in its lobbying of the Committee on that issue and looking after developing countries and third-world suppliers. It has provided data on case studies, one of which concerned a cashew nut grower in India who had packaged an order for one of the major supermarket clients in the UK. The client then decided that they wanted different packaging and the grower was stuck with the order. 

Cashew nut growers in India do not seem to me to be the type of supplier that can withstand supplier arrangements being changed at the last minute. That case was one of the major pieces of evidence that went to the Competition Commission, which led it to conclude that large retailers were known for transferring excessive risks to suppliers. That then feeds into progress in the supply chain and the pay and conditions and innovation that third world and developing countries are able to put in place. ActionAid has given us examples of labourers being pretty badly treated. There could be a number of reasons for that, but one of the reasons given is that supermarkets have driven down costs so much that the workers who are producing and supplying the supermarkets are not able to have breaks and are not treated properly because of the terms and conditions. It is hugely important to look at the territorial extent of the clause and to give the adjudicator some power to examine the issues and take them forward if necessary. 

The subsidiary issue is also worth exploring. I raised that issue directly with the British Retail Consortium. A large retailer can set up a subsidiary in this country or in another to do all the buying for particular items, or indeed for all its items. The relationship would therefore be between the large retailer and the subsidiary, rather than between the large retailer and anyone who was supplying any of their goods. The British Retail Consortium said that that would already be covered by the code and that it would be unlikely that that would happen. However, the hon. Member for St Ives has given examples where that might not be the case. The adjudicator will be refereeing the relationship between the large retailer and the first-level primary producer. That first-level primary producer or supplier could be a subsidiary based in another country and would not be able to be covered by the code. 

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If the large retailer were to set up a subsidiary in another country, which might not even be in Europe, to buy apples from Apple X Ltd, the relationship with Apple X Ltd would be through the subsidiary to the supermarket or the large retailer, and not the supplier of apples sitting below Apple X Ltd. So territoriality and whether the subsidiary element of large retailers would be covered by the code is important. Hopefully, the Minister will say that the code allows the direct supply chain to be covered by the code and that the hon. Gentleman’s very good probing amendment allows us to look at some of those issues. Or perhaps she will come back on Report not with an amendment to the Bill, but certainly with some analysis on how the measure would work in practice. The large retailers are wily old chaps who will do anything they can—not to circumnavigate the legislation; I would not be that cruel to them—to affect the impact on their profitability and efficiency. They may decide that this is a good way for them to go. 

On the point about subsidiarity and the large retailers, there is an issue on the other side. Many of the primary producers and first-level supply chain suppliers involved in that direct relationship are sometimes bigger than the retailer. Coca-Cola and Kraft are probably bigger than most of the retailers, if not all of them put together. We are legislating for that relationship as well. That is a relationship whereby the very large supplier may be powerful in conjunction with smaller large retailers as defined in the Bill. Given the subsidiarity requirements, in that case we would be protecting Coca-Cola’s relationship with Iceland, for example, but we would not be protecting the Indian cashew nut grower in relation to Sainsbury’s. There is a bit of a dynamic shift in the Bill. I would welcome some comfort from the Minister on the point of the subsidiarity and territoriality of the Bill. 

Jo Swinson:  There has been a little discussion about intermediaries, but I am sure, Sir Roger, that you would not want me to stray on to that territory until later in our proceedings—perhaps on Tuesday morning—when we reach the relevant provisions. I shall therefore focus my remarks on subsidiaries. 

The amendment tabled by my hon. Friend the Member for St Ives would require the adjudicator, when recommending changes to the code to the OFT under clause 13, to consider the territorial extent of the code and the activities of the large retailers outside the UK. I do not think that the amendment is necessary. Importantly, article 4 of the Groceries (Supply Chain Practices) Market Investigation Order 2009 already requires large retailers to procure that their subsidiaries—whether or not in the UK—comply with that order, which includes incorporating the code into their supply agreements. Article 4(4), which is in part 2 of that order, states: 

“Each Designated Retailer will procure that its subsidiaries comply with this Order as if they were themselves bound by them”, 

so such protection is already in place. In addition, article 5 of the order requires that the code is incorporated into supply agreements, so any subsidiaries involved in buying activities would be required to have the code incorporated in such agreements. 

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There is further protection in clause 22 of the Bill, which makes it clear that 

“‘large retailer’ means a designated retailer as defined by Article 2 of the Groceries Supply Order or a subsidiary of a designated retailer”. 

Subsidiaries are therefore covered by the code, regardless of whether they are based in the UK. 

Andrew George:  I am grateful to my hon. Friend for highlighting those points. Perhaps I should have expanded on the word “subsidiary” when I was moving the amendment, but how does she define “subsidiary”? We suspect, as the hon. Member for Edinburgh South suggested, that these are wily people who have the bottom line very much in mind. If they think there is a way of redefining this issue and finding a way around it, I am sure that they will. 

2.30 pm 

Jo Swinson:  My hon. Friend posits the suggestion that some of the supermarkets might be tempted effectively to use another company that is not their subsidiary. He gave an example involving apples and suggested that a company that was not the subsidiary would do all the buying, and therefore be able to put the thumbscrews on the next stage in the supply chain. The definition of “subsidiary” is clearly set out in law in Companies Acts, so the key point is whether the company at the top controls the subsidiary, which would ultimately be tested in law. During the two years for which the order has been in place, there has been no evidence that such practice has been happening, but if there was evidence that that type of thing was going on, the OFT and the Competition Commission could consider whether the order needed amending. They could do that independently, without any recommendation from the adjudicator, but we do not anticipate that being necessary. 

It is important that this clause on recommendations is clear and broad, and that it covers absolutely everything that the adjudicator may want to include. It states: 

“If the Adjudicator considers it appropriate for any changes to be made to the Groceries Code, he or she must recommend them to the Office of Fair Trading.” 

The power proposed by my hon. Friend’s amendment is certainly not prohibited by that wording, and singling out one specific aspect of the code would place that on a different level and highlight that we might expect a problem in that particular area, which could give it more prominence than any other aspect that the adjudicator may suggest. 

It was helpful that my hon. Friend said that subsidiaries could cause a problem—his hypothetical has been posited—but that is not necessarily something that we are expecting. It is ultimately for the OFT and the Competition Commission to decide whether, having looked at the facts, a change is appropriate in the context of their competition powers under the Enterprise Act 2002. 

I hope that my hon. Friend is reassured that the adjudicator will be able to make recommendations as it sees fit and that the OFT will have a responsibility to consider those recommendations in line with its duties under the 2002 Act. If a change is needed, that can certainly happen, and I hope that that explanation is sufficient for him to feel able to withdraw his amendment. 

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Andrew George:  I have such admiration for the Minister that if she is reassured, I am reassured. I am also reassured that there is no method by which the supermarkets might sidestep their responsibilities under the code by setting up bodies or organisations, or by using their relationship with other companies—be they subsidiaries under defined law or otherwise. The fact that she believes that the amendment is unnecessary is reassuring. 

As I have done following our consideration of my other probing amendments, I will leave the Minister with a couple of thoughts on which the Government might wish to reflect. First, she has referred on several occasions to wishing not to constrain the adjudicator, but rather to give it as much discretion as is reasonable. It might be useful for the Government and their lawyers to enable the adjudicator to be given sufficient discretion so that it is nimble, capable and able to chase down any attempt by supermarkets to sidestep their responsibilities. At this stage in the Bill’s passage—this is the case for any legislation, but certainly for legislation such as this—we are attempting to anticipate circumstances in which those who have sought to resist the imposition of these regulations are able to employ the highest paid lawyers to avoid working under it. We need to ensure that we have anticipated their attempts to avoid their responsibilities by being as clever as they are, or wish to be. 

My hon. Friend highlighted importance of the recommendations that the adjudicator can make to the OFT. My attempts on amendment 40 have not been successful—at least not so farbut given that she is saying that the adjudicator should have discretion, will she will reflect on whether it would be reasonable for it to be given the authority to make recommendations in relation to the order, as well the code itself? I do not think that anything would be lost by giving such discretion to the adjudicator. Indeed, it would further strengthen the Bill and reassure many of us who are concerned that this is an area in which we need to be ever vigilant and watchful that the code can be effectively enforced and not sidestepped by the supermarkets. 

Having said all that, however, I did appreciate the Minister’s response, as I appreciated what the hon. Member for Edinburgh South said. There may be some issues to consider on Report, which I urge my hon. Friend to think about, but we have had a good debate, and I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Ian Murray:  I beg to move amendment 51, in clause 13, page 5, line 3, at end add— 

‘(2) The Office of Fair Trading shall be required to respond to the Adjudicator and Secretary of State on the recommendations as set out in subsection (1) explaining whether they will be acted upon or not.’.

The Chair:  With this it will be convenient to discuss amendment 56, in clause 14, page 5, line 14, at end insert— 

‘(3A) The Adjudicator must consider in advance of each annual report whether to recommend changes to the Groceries Code to the Office of Fair Trading.’.

Ian Murray:  First, I should confess that I will not be speaking to amendment 56. Although I tabled it, on reflection, I have absolutely no idea what it means. I

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looked at it yesterday to try to come up with an argument in its favour, but I think we have already covered the relevant points. 

Stephen Mosley (City of Chester) (Con):  That has not stopped you with previous amendments. 

Ian Murray:  The hon. Gentleman is very cruel, but I shall take his point in the spirit in which it was intended. I hope that he will see fit to support the amendment that I do understand. 

Amendment 51 would put a requirement in the Bill for the OFT to report back to the adjudicator about any recommendations made under clause 13 and what actions will be taken. As the hon. Member for St Ives said in the previous debate, it is important that we keep the code as live as possible. The adjudicator is only as effective as the code; if it is refereeing an ineffective code, the whole process is undermined. 

I welcome the thrust of clause 13, which allows feedback about the code to be given to the OFT, but I refer back to amendment 40, which would have been quite useful, as it would have said that the referee of the code would be involved with both the code and the groceries supply order. If the adjudicator had the ability to amend both, even by recommendation, it might keep the whole system live and up to date to reflect what is happening in the industry. 

There is little point in an expert such as the adjudicator making recommendations if the OFT or the Secretary of State do not act upon them. There might be perfectly good reasons for not acting, but it would be appropriate for the OFT—and the Secretary of State, if it goes to that level—to report back to the adjudicator publically so that the process is as transparent as possible. 

The National Farmers Union has set out clearly its belief that the Bill should be amended to ensure that the regulator is required to make a regular assessment of the effectiveness of the code. Clause 13 hints at that process, and we support that. Some feedback probably will be given under clause 13, but the Bill does not mandate a formal mechanism for assessment. New clause 2, which we will debate on Tuesday—probably early on Tuesday—would bring intermediaries into the scope of the code. Although we will not discuss intermediaries now, and the Minister has given us a hint about that, the issue is closely related to this clause. Indeed, new clause 2 was originally drafted as an attempt to amend clause 13 to allow for the code to be extended to intermediaries. 

We have heard that the adjudicator is the referee for the code, but the adjudicator must be able to identify when the code is defective and to recommend a remedy to ensure that suppliers and retailers are protected. I said on Tuesday that we have a focus on suppliers, but the code has to be kept live for the benefit of the retailers. If an aspect of the code is defective, we may find that retailers breach it more regularly than would be practical. It is important to stress that making the relationship work better is a two-way street. 

The adjudicator might recommend to the OFT that the code should be changed in such a way as to improve the relationship, but the OFT might decide not to do so. When we were debating fines, I used the analogy of a football referee issuing a red card, and we talked about how convoluted the old process was—admittedly, it has

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now been amended—and how long it took for the ultimate sanction to be issued. That is now sorted, because the Bill covers fines. To continue with my analogy, however, the referee might decide that a yellow card was too little punishment for a certain offence, but that a red card was too much, and thus recommend that the OFT should amend the code to include a green card that would sin-bin a player for a certain amount of time, rather than going to extremes. The adjudicator might recommend year after year in its annual report that the OFT and the Secretary of State should look at that matter, but those recommendations might be completely ignored and simply disappear into the ether. If there was no feedback from the process, there would be a question of whether the code was staying live. 

If I may extend my sporting analogy a little further, referees sometimes recommend changes to the rulebook to make it work better. There was a prime example in tennis, for which the challenge rule was introduced because the pace of the modern game made it difficult for referees and umpires to tell whether a ball was in or out. McEnroe had been throwing his rackets around for 20 years—he became famous for doing so—but following a recommendation from the referees, a diktat came down from the governing body to say that the rules could be changed, with an explanation of why. Equally, governing bodies give explanations of why things cannot be changed all the time. The public would appreciate such transparent, two-way dialogue. 

We can envisage the OFT making adjustments to not only the code, but the supply order itself. It might decide to make some changes to the order without a recommendation from the adjudicator, because the adjudicator does not have the power to make one, and there could then be a two-way dialogue about what approach would be most appropriate. 

We want to ensure that there is transparency and accountability. We have discussed at length the need to place the adjudicator on a credible footing, to ensure that large retailers are confident that it can do its job properly, and to ensure that suppliers are confident that their complaints will be dealt with properly and transparently. If the adjudicator recommends changes to the code under clause 13, any feedback from the OFT about its decision would provide transparency and credibility, and that would inspire confidence in the system and give it more teeth, although I do not know whether it is possible to magic up a tiger with two sets of teeth. 

We really wish to probe the Minister on this point. We appreciate that the adjudicator will have wide-ranging powers, that it will make recommendations and that the OFT, in all its wisdom, will probably act on those recommendations. However, unless the OFT reports back, there is no way of knowing whether that will happen, so the requirement to report back should be in the Bill. There needs to be transparency in the process whereby reports and recommendations go to and from the adjudicator and the OFT so that the code is live, and it is kept live. 

2.45 pm 

Jo Swinson:  I thank the hon. Gentleman for his honesty on amendment 56. We have possibly all been in that situation from time to time, and I welcome

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his recognition that the duty and requirement on the adjudicator in clause 13 already means that it will need to make recommendations to the OFT if it thinks changes ought to be made to the groceries code. That will be a duty upon it at all times, not just in advance of producing the annual report. I welcome his recognition the amendment is therefore unnecessary. 

My task is now to persuade the hon. Gentleman that amendment 51 is also unnecessary. As he said, the amendment would explicitly require the OFT to respond to any recommendations made by the adjudicator. I understand the logic behind the amendment, but I do not consider it strictly necessary because of a range of other requirements on the OFT that are already in place, which would require it to respond appropriately. 

As a public authority, the OFT has a general duty to act reasonably, which includes a duty to respond, where appropriate, to members of the public and to other public authorities. More specifically, it has a duty to keep under review the groceries supply order—we heard of that earlier today, and indeed I brandished the book in which it is contained at my hon. Friend the Member for St Ives—in accordance with section 162 of the Enterprise Act 2002. If it considers that a change is appropriate because circumstances have changed, it will advise the Competition Commission accordingly. It is worth drawing to the Committee’s attention that such changes would need to be related to the material adverse effect originally identified and reported on by the Competition Commission when it performed its initial investigation. 

The OFT will need to consider its actions in accordance with its duties under the Enterprise Act and its broader statutory functions and duties. I certainly do not think that a situation such as has been mentioned, whereby it just ignored recommendations that were put to it, would come to pass. It will not always act on the adjudicator’s recommendations, because it is the competition authority responsible for examining in detail whether a further change may be required. However, it would be reasonable for it to consider the recommendation, at least. 

I can almost hear the potential intervention: what if, year after year, the OFT ignored the recommendations? In that extreme circumstance, if it did that without giving any rationale or reason, it would still be possible to challenge it. Select Committees would have a role to play, and it would even be possible for a supplier to take out a judicial review against the OFT if it had failed to act according to its reasonable behaviour duties and the Enterprise Act duties. 

It is unnecessary to add the amendment’s wording to the Bill, as it would not provide any additional force to what the OFT would have to do. I hope that the hon. Member for Edinburgh South is reassured by the legal position and the duties that are already on the OFT. 

Ian Murray:  I appreciate the Minister’s comments. The amendment was not intended to undermine the OFT in any way; it does a good job, and in many instances it acts reasonably. The amendment was intended to suggest not that the OFT would not act reasonably, but that a formal mechanism for reporting back to the adjudicator should be put in place so that it can assess how any recommendations that it has made have been considered and whether any action will be taken. 

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I mentioned that the OFT might ignore recommendations. I am not suggesting that it would, but it may choose not to address them, or it might address them but choose not to act upon them because it does not feel that is required. Putting a formal reporting process in the Bill would say to the adjudicator that we have a mechanism for it to recommend changes to the code, that the recommendations will be addressed and that the adjudicator will be told whether they will be acted on, and if not, the reasons why not. That would keep the whole process transparent. 

I understand that there are already mechanisms in place for the OFT to be taken to task if it is felt that it is not carrying out its duties correctly, but I feel that there should be a mechanism in the Bill that allows a transparent approach of reporting back to the adjudicator what could be pretty substantial recommendations, to keep the code live. However, because I feel as generous today as the Minister felt on Tuesday, I will not press the amendment to a vote. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Clause 13 ordered to stand part of the Bill.  

Clause 14 

Annual report 

Ian Murray:  I beg to move amendment 52, in clause 14, page 5, line 12, at end insert— 

‘(d) the resources available to the Adjudicator.

(e) recommendations made to the Office of Fair Trading as set out in section 13.’.

The Chair:  With this it will be convenient to discuss amendment 53, in clause 14, page 5, line 19, at end insert— 

‘(c) the Business, Innovation and Skills Select Committee;

(d) the Environment, Food and Rural Affairs Select Committee;

(e) their respective successor committees from time to time; and

(f) the Devolved Administrations’.

Ian Murray:  The Committee will be pleased to hear that I do know what these amendments are about. Perhaps the power of my persuasive argument will mean that the hon. Member for City of Chester will feel able to support them. 

As clause 14 stands, the report that the adjudicator must prepare at the end of each reporting period must include a summary of disputes, which we would assume would be in the report as a matter of course; the investigations that have been carried out, which again seems fairly obvious; and the cases in which the adjudicator has used enforcement measures, as we discussed when considering clause 6. That seems a reasonable summary of what should be included in the report, and amendment 52 would merely add two very small specifications to that list. 

Subsection (2)(d) in amendment 52 would result in the report specifying the resources available to the adjudicator and whether they were adequate for their purposes. That is quite a sensitive issue, because the adjudicator will be paid for by a levy on supermarkets

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and large retailers, so keeping under review the resources available to the adjudicator, by including them in the adjudicator’s report, is a sensible approach. 

The second point, which would be added by proposed new paragraph (e), would have been to add to the report any 

“recommendations made to the Office of Fair Trading as set out in section 13.” 

That was consequential to amendment 51 to clause 13, but as the Committee did not agree to that amendment, it is no longer required. However, we would like to press the issue of adding to the report the resources available to the adjudicator. 

Andy Sawford (Corby) (Lab/Co-op):  I think the public have a healthy scepticism about the role of quasi-autonomous non-governmental organisations—they come with all sorts of different names, do they not? If the adjudicator is to have the confidence of the public, the public will need to see that the adjudicator is good value for money. Does my hon. Friend agree that that is a good reason to support his amendment? 

Ian Murray:  I appreciate my hon. Friend’s intervention. Every member of the Committee will appreciate that the Opposition look to spend every penny of public money sensibly. The adjudicator will be funded by levies on the large retailers. It will be important that, on a regular basis, the adjudicator says in the report to the OFT and the Secretary of State, “The levies we are getting in from the retailers are enabling us to do x, but in actual fact, we are finding breaches of the code that mean that we would like to do y; also, many third parties are coming forward and telling us about historical breaches that are still happening now, and we would like to investigate those.” The ability to take such issues forward would come down entirely to the resourcing of the adjudicator, and therefore the report should include not only the resources available to them but the resources that they may require. 

We do not want to see large amounts of—or indeed any—public money being given to the adjudicator because they do not have the resources they need. The adjudicator’s office is a body that should be funded by the industry. My hon. Friend makes a valuable intervention, and I hope that the Minister will give us some assurance that the adjudicator will be properly resourced and that the annual report will include the issue of resourcing. 

Amendment 53 would add conditions relating to publishing the report. The clause already says: 

“The report must set out any recommendations that the Adjudicator has made to the Office of Fair Trading for changes to the Groceries Code.” 

That report will be published and sent to the Secretary of State and the Office of Fair Trading, but we should also ensure that it is available to the relevant Select Committees. We discussed at great length in our debates on clause 1 the involvement of Select Committees in pre-appointment hearings, and it is important for the annual report to given to Parliament. The Business, Innovation and Skills Committee and the Environment, Food and Rural Affairs Committee will have a key input into the adjudication process and the work of not just the adjudicator but the industry as a whole. The BIS Committee may want to look at a business aspect of the matter, or there may be an ongoing issue to do with food production, rural affairs or the environment.

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Those Committees may want to look at the annual report from time to time, as may the devolved Administrations. 

I am sure that the Minister is going to pop up and say that as a matter of course, any Select Committee can call in a report, hold an inquiry and debate it, and that it will be sent to the devolved Administrations as a matter of course as well. However, it is important to say in the Bill that the process will be transparent and inclusive, and that Select Committees are a valuable resource for the House and will be sent a copy of the report as a matter of course. The Committees can then decide whether they wish to act on the report itself, or whether they wish to set up an inquiry to examine anything that comes from it. These are two straightforward, sensible and—I think this was the terminology from Tuesday—beautiful amendments. I hope that the Committee will support them. 

Jo Swinson:  Again, I thank the hon. Gentleman for his amendments, although I am not sure whether they could be considered beautiful. Perhaps in a charitable mood I could agree that that might be the case, but I do not think that is a good enough reason to include them in the Bill. Beautiful or otherwise, they are unnecessary, and I hope to convince him and the Committee why. 

The annual report will clearly be an important tool in the adjudicator’s armoury. I am sure that it will be looked at by a range of stakeholders, from campaign groups to retailers, suppliers, members of the public and Members of Parliament. We want it to set out a factual description of the adjudicator’s activities, which will ensure transparency as to what the adjudicator is doing. It will also have to set out the actions that the adjudicator has undertaken in the course of their duties during the preceding year. It is quite right that it will be scrutinised thoroughly, which is to be expected. 

I turn to amendment 52, and particularly the part about the resources available to the adjudicator. I accept what the hon. Gentleman says about paragraph (e) of no longer making much sense, given that the previous amendment was not accepted. However, information on those resources will already be available, and that is already set out in various places. Clause 14(4) states that the recommendations made by the adjudicator must be set out. If Members turn to page 14 of the Bill, they will see that paragraph 15 of schedule 1 states that the Secretary of State must lay before Parliament a copy of the adjudicator’s statement of accounts, which must have been certified by the Comptroller and Auditor General. Clearly, that statement will have to contain details of the resources available to the adjudicator. Clause 19(8), on levy funding, states: 

“The Adjudicator must publish detail of levies and an explanation of how the amounts have been decided”. 

All that information will make clear what the resources of the adjudicator are. 

The hon. Gentleman was right to say that such information needs to be in the public domain, which is why that is stated in the Bill. It will be possible for people to make judgments about value for money, and details of the resources available to the adjudicator to enable it to carry out its functions will be transparent for everybody involved. For that reason, amendment 52 would not add substantively to what is already in the Bill. 

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3 pm 

The hon. Gentleman set out the case for amendment 53, which would require the annual report to be sent to the Business, Innovation and Skills Select Committee and the Environment, Food and Rural Affairs Select Committee. He anticipated my response—I do not believe it is necessary to set that out in the Bill. The annual report will be laid before Parliament in accordance with clause 14(6), which means that it will also be available publicly online for Select Committees to consider. They will be able to conduct such inquiries or scrutiny as they see fit. The amendment is definitely well meant, but it is not essential. 

I expect all such information to be contained on the website, to which reference has been made. It is worth bringing to the Committee’s attention that the name www.off-trolley.co.uk does not seem to have been taken. “Unknown host” is the message that comes up, so who knows what suggestions might arise from the creative talents of the hon. Member for Vale of Clwyd? 

Ian Murray:  Just for the sake of clarity, will the Minister repeat that suggested name, as I believe that the hon. Member for Vale of Clwyd might have been the out of the room while that particular bombshell was being dropped? 

Jo Swinson:  I am very happy to oblige. I am sure that the hon. Member for Vale of Clwyd, who has been doing his job assiduously in the Committee, will be keen to know that I have just checked, and www.off-trolley.co.uk does not yet appear to have been nabbed. It currently says “unknown host”, so I do not know whether there will suddenly be a flurry of applications to the various authorities that give out domain names before we leave Committee this afternoon. Who knows? That might well be an option for the adjudicator to pursue. However, Select Committees will already be able to get the information from whatever website it is published on, whatever the URL. 

The devolved Administrations are also referred to in amendment 53. As we have discussed previously, we want the adjudicator to work closely with devolved Administrations, but because competition law is reserved and they will not have direct authority over the adjudicator, putting that in the Bill would run the risk of a degree of confusion and blurring the lines of authority on the role of the adjudicator. Obviously the devolved Administrations will have access to the information, as is appropriate. I hope I have convinced the hon. Member for Edinburgh South that the provision of information will be adequate and that the amendments are unnecessary. 

Ian Murray:  I feel reassured. My hon. Friend the Member for Ogmore is not in the Committee this afternoon—he is here in name, but not in presence. We were thinking that he would quickly take part in the debate in the House and then rejoin us, but matters are obviously taking slightly longer than we had thought. I appreciate what the Minister says about the details of the resourcing of the adjudicator being included in other parts of the Bill, so I shall not press amendment 52. 

I am unclear why the Government are so reluctant include in Bills the need for scrutiny by Select Committees, as that would be sensible action to take. My hon. Friend

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the Member for West Bromwich West (Mr Bailey) and the hon. Member for Thirsk and Malton (Miss McIntosh) might be surprised to know that the Minister is so reluctant to include their Select Committees in the Bill. However, given that we have discussed the matter and probed the Minister into telling us why she hates Select Committees so much, I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Clause 14 ordered to stand part of the Bill.  

Clause 15 

Review of Adjudicator and guidance from Secretary of State 

Ian Murray:  I beg to move amendment 24, in clause 15, page 5, line 27, after ‘must’, insert 

‘appoint an independent Review Panel to’. 

The Chair:  With this it will be convenient to discuss amendment 25, in clause 15, page 5, line 28, at end add— 

‘( ) The Independent Review Panel shall be chaired by a judge of the High Court or the Court of Session and comprise—

(a) a representative of the retail sector;

(b) a representative of the supply sector; and

(c) a consumer representative.’.

Ian Murray:  Again, these amendments are about the independence of the adjudicator. Although we appreciate that the Secretary of State has a supervisory role, we have to ensure that that does not mean that the adjudicator is consumed by political influence or issues that the Secretary of State wants them to address. Amendment 24 is a simple probing amendment that suggests that an independent review body may be a far better mechanism to review the adjudicator and to provide guidance. Will the Minister consider an independent review panel that would look at the work of the adjudicator and consider their powers? Will she consider reviews being carried out by such a panel, rather than by the Secretary of State? 

Amendment 25 sets out what the panel would look like. I appreciate that we do not want to be racking up significant costs or delays through an independent review panel, but if it were chaired by a senior member of the court system and had representatives from the retail and supply sectors and a consumer representative, we would have a really strong system whereby the work of the adjudicator could be reviewed by the very bodies that they are refereeing. That would allow for a healthy debate between consumers, suppliers and the large retailers and for an open and independent review of what was happening with the adjudication unit, rather than that role being taken by the Secretary of State. 

I hope that the Minister appreciates that we are trying as best as possible to make the whole project open and transparent and to have a proper dialogue between all the parties involved. An independent review panel would be in a far better position to independently review the work of the adjudicator outwith the powers

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of the Secretary of State. That would remove any possible accusations of political influence over any of the major issues that the adjudicator may deal with. 

As all Committee members have mentioned and the hon. Member for St Ives has emphasised, we hope that the adjudicator will become redundant when the Bill comes in. We hope that the adjudicator will have absolutely nothing to do and that supply chains will work seamlessly. However, if the opposite situation arises and there is a major problem, an independent panel would ensure that it would not appear that the Secretary of State had any political influence over the adjudicator in the review process. That would not only protect the adjudicator but, to a certain extent, would protect the Secretary of State from such accusations. An independent review body would be allowed to examine such issues on a level playing field, with equal representation from all parties involved, and then be able to make recommendations about reviewing the adjudicator. 

The amendments are fairly simple, but they are intended to protect the adjudicator and the Secretary of State, and I hope the Committee will accept them. 

Jo Swinson:  I hate to disappoint the hon. Member for Edinburgh South. It must sound uncharitable, but I am not particularly minded to accept the amendments. I hope, however, to convince him through the powers of persuasion and argument that his is not the best way to proceed. I understand the issues he raises around independence and ensuring that the adjudicator functions well, but there are a couple of reasons why the amendments are not the right way forward. 

First, the adjudicator is a ministerial appointment. It is therefore consistent that it is the Minister—in this case the Secretary of State—who should review their progress and effectiveness. It is important that independent ministerial appointments are ultimately accountable to elected Ministers and, through them, to Parliament. The independent review panel outlined in the hon. Gentleman’s amendment would not have that same accountability function. I want to reassure the Committee, as I have on some earlier groups of amendments, that we absolutely recognise the importance of the adjudicator’s independence. They will have full operational independence, without being subject to political interference. 

The adjudicator’s functions can only be carried out by the adjudicator. They will not be a civil servant, and the Secretary of State has only a very limited power to give guidance after a triennial review. The adjudicator can only be removed from office under exceptional circumstances. All those things ensure that there is genuine independence. It is important, however, that at some point, offices established by Government are accountable to Ministers and, through them, to Parliament. That is the purpose of the triennial review, and it is right and proper that the Secretary of State carries that out. 

Secondly, while the amendment has a clear desire to give affected parties a stake in the future of the adjudicator, there are better ways to achieve the same ends, which we share. Paragraphs (d) to (f) of clause 15(7) clearly lay out an explicit requirement that the Secretary of State consults representatives of retailers, suppliers and consumers when conducting the triennial review. That will allow stakeholders’ views to be clearly heard in that process, while rightly leaving the final decision in the hands of Ministers. 

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I hope that those two points have both reassured and persuaded the hon. Gentleman that the adjudicator is properly independent and that stakeholders will be appropriately heard. Ultimate accountability for this public office has to come to Parliament and that is why it is appropriate that the Secretary of State carries out the review. 

Ian Murray:  We tabled the amendments on the review process purely because Traidcraft and other organisations were concerned about the potential politicisation of the process, given the power relationship between the large retailers and the suppliers and that between the large retailers and this place. There were concerns that the Secretary of State conducting that review may feel obliged, one way or another, to be influenced on how the adjudicator operates. I am content with subsection (7), which states that the Secretary of State must consult a number of bodies. We attempted with an earlier amendment to add the devolved Administrations to that list, but I appreciate that there will be that kind of consultation with all the interested parties when the review is being conducted. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Amendment made: 11, in clause 15, page 5, line 38, at end insert— 

‘( ) A review may consider whether it would be desirable to amend or replace the order for the time being in force under section  9(7).’.—(Jo Swinson.)

Ian Murray:  I beg to move amendment 55, in clause 15, page 6, line 18, leave out subsection (10). 

The amendment is in the name of my hon. Friend the Member for Ogmore, but given that he is still in the Chamber, I will speak to this probing amendment. 

The reason for this amendment—the hon. Member for City of Chester might be interested to hear this— is that we are not quite sure what this part of the Bill is for. We are looking for an explanation from the Minister. Our amendment would simply leave out subsection (10). 

Allowing third-party evidence was a victory for organisations and the noble Lords in the other place. It strengthened the Bill immeasurably and will help with the adjudicator’s work in identifying and dealing with breaches of the code. The Minister’s predecessor in her role, the now Minister of State, Department of Health, the hon. Member for North Norfolk (Norman Lamb), who has had quite a hearing in this Committee, said earlier this year: 

“I have responded to concerns from the Select Committee and others that trade associations should be able to complain to the Adjudicator and have amended the draft Bill to provide for this.” 

That was a great step forward, because it widened the scope of the adjudicator. We now have third-party evidence and fines on the face of the Bill. I hope that the Minister will be generous enough to include intermediaries when we get to that part of the Bill on Tuesday. We will wait and see. I hope she has an incredibly good weekend and will be able to accept some of our amendments. One of the key points is anonymity. There is a grave concern that this section of the Bill is unnecessary and may compromise some of that anonymity. 

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3.15 pm 

Clause 15(10) says, 

“The Secretary of State may by order provide that the following section is to be inserted after section 4 if, as a result of the findings of a review, the Secretary of State thinks that it would be desirable to do so.” 

There is no explanation of what would constitute the Secretary of State thinking it would be desirable to do so. There is nothing in the other subsections of the clause that would give rise to whether the Secretary of State may or may not want to include this part of the Bill. Trade associations have the important role of protecting the identity of their members who might want to complain about breaches of the code. It seems that inserting proposed new section 4A into the code would undermine that process. I look forward to the Minister’s explanation. 

We do not want to end up with vexatious or malicious complaints, or to have the adjudicator going on fishing missions because a third party has brought forward information for the adjudicator to deal with. Frivolous and malicious complaints will undermine the whole system. I hope the adjudicator will be particularly strong in dealing with those. They have to be given the power to do that. 

Importantly, the adjudicator will first have to be satisfied of the veracity and integrity of any complaint before launching an investigation. We discussed the knowledge and expertise of the adjudicator on a previous amendment. This is an area where that will come into play with their ability to deal with information coming forward. Their understanding of the code and the industry will be fundamental. That will go some way to reducing malicious, frivolous or vexatious claims, or abuses that cannot be substantiated. 

There is a feeling that the safeguards that have been built into the Bill by successes in the other place are potentially being undermined by the Secretary of State inserting this particular part into the Bill. I say this is at the whim of the Secretary of State but there is no specification in the Bill of the circumstances whereby the Secretary of State might want to use this provision. 

Has the BIS Department undertaken any analysis of the likelihood of frivolous claims? Has any modelling been done of how many would come forward? 

Andrew George:  On the point of inappropriate claims, does the hon. Gentleman accept that clause 10, which would permit the recovery of costs against those whose complaints are demonstrated to have no merit, would be sufficient to address that issue? 

Ian Murray:  Yes, but in instances where costs can be awarded in the employment tribunal system, for example, judges are very reluctant to award costs for frivolous claims. I appreciate that that matter is in the Bill. One often finds at employment tribunals that judges want to hear the facts of a case going down certain avenues until they decide whether it is vexatious or otherwise. They are very reluctant to use cost orders in that example. I hope the adjudicator would feel confident enough to use cost orders in this example. It will be only in practice that we will know whether that is the case. I hope the message goes out from this Committee that we would support the adjudicator in the use of those powers. I hope the adjudicator will use them regularly

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and appropriately. There will of course be instances when the adjudicator may use the cost powers in the Bill for an issue that the adjudicator feels is vexatious or frivolous and then it turns out not to be. Mistakes will be made but I hope the adjudicator will have confidence. That is a question to put to the Minister. 

Was any analysis done before subsection (10) was put in place? On the basis of our concerns, I am asking, through the amendment, whether something can be brought forward on Report to clarify what that subsection is designed to do, because if proposed new section 4A is inserted after section 4, it will confuse the issue in relation to frivolous claims, anonymity and the information that can be supplied to the adjudicator when they are making a proper assessment of whether an investigation should be conducted. 

Andrew George:  The Committee pausing for a moment to debate this issue is worth while, so I am grateful to the hon. Member for Edinburgh South for raising it. A very important milestone in the development of the Bill was reached as a result of people expressing concern—the Select Committees also raised the issue—that in view of the climate of fear, suppliers would not use the code to complain directly about their treatment by supermarkets and that there had to be a mechanism by which information presented to the adjudicator could be dealt with in a protected manner. This is not just about trade associations publishing material on the current state of the milk supply chain or whatever it may be. Trade associations and others may also seek to provide information to the adjudicator indirectly, perhaps by means of a collection of suppliers. Therefore, any reassurance that the Minister can give that the adjudicator has the power to instigate investigations on the basis of what one might broadly describe as market intelligence in that manner is very important. 

Also, there appears to be an internal contradiction between subsections (1) and (2) of proposed new section 4A. Subsection (1) states that the adjudicator “may consider only” certain limited items, in paragraphs (a) to (d), yet subsection (2) says that the adjudicator 

“is not limited to considering the information mentioned in subsection (1).” 

I admit to being rather confused by that, because it seems that subsection (2) in effect strikes out subsection (1) and more or less says that any information is appropriate. It seems to make subsection (1) rather superfluous. 

Jo Swinson:  I appreciate the opportunity for us to discuss this issue in Committee. I am very happy to explain the background of how we have got to this point, with clause 15(10) being part of the Bill. The wider issue was discussed extensively during the pre-legislative scrutiny phase. I am referring to the issue of who should be able to complain to the adjudicator and what can be a trigger for starting an investigation. As has been outlined, when the Bill was originally published, clause 4 was much more restrictive about how an investigation by the adjudicator could be triggered. One could be triggered only by information from suppliers or information that was already in the public domain when they were deciding whether to start an investigation. It is fair to say that suppliers are the most likely parties to have information that would show that a breach of

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the code has taken place, and we do not want the adjudicator to be deluged by large amounts of information that does not necessarily relate directly to issues that they should be dealing with. 

However, we did listen carefully because, at the pre-legislative scrutiny stage, the BIS Committee made a clear recommendation that we remove the restriction and allow the adjudicator to consider information from any source that came forward. As my hon. Friend the Member for St Ives and others have mentioned, a range of supplier groups put forward a coherent argument that that climate of fear and concern could mean that the additional protection of being able to complain through a third party—a trade association—would be helpful. That might also be able to give more of a context to the types of practices that are going on, because it would not just be about an individual supplier, as a trade association might have experiences from several suppliers and could therefore point to broad patterns of behaviours. We accordingly listened and amended the Bill to allow the adjudicator to look at information from any source. I absolutely stand by that; it was the right thing to do, because it is likely to be more successful if that information can be considered. 

That does not mean, however, that our concern about the adjudicator being deluged by irrelevant information has entirely gone away. We touched on that earlier, when discussing whether advising the public should be expressly written into the Bill. In the example of the recent dairy issues in the industry, had the adjudicator been up and running, it could have had a deluge of contact. 

On vexatious and frivolous complaints, it is right that because of the awarding of costs outlined in clause 10(2), some protection is provided against such complaints. However, the adjudicator will have a small budget and a small team of staff, and they really need to be focused on particular breaches of the code, rather than having a wide, overseeing role. There is the fear that through the best of intentions, third parties could bring forward lots of information, perhaps through campaigns or otherwise, with much of it potentially irrelevant or even misleading. That could lead to a situation we do not want to see, where there is a big strain on the adjudicator’s time and resources, and unnecessary burdens on retailers. That is why we looked—at the same time as bringing forward the ability to have information coming from any source—at having a backstop, in case the issues we were concerned about came to pass. 

Ian Murray:  I wonder whether the Minister can provide clarity. Is she saying that while the Government have amended the Bill to allow trade-association third parties to provide information, the Secretary of State is reserving the right to reinsert a provision into the Bill to stop it from happening in future? If that is the case, what is the mechanism for that to be removed from the Bill, if the Secretary of State thinks it is appropriate? I think that the Minister mentioned a triennial review previously, so that could mean that trade associations are able to bring forward such complaints to the adjudicator for that period of time. 

Jo Swinson:  The hon. Gentleman asks a good question. If the Secretary of State finds that there is a problem when looking at the overall workings of the adjudicator through the triennial review, proposed new section 4A

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could become part of the Bill. That would be done through secondary legislation, so it would not be without parliamentary scrutiny, as Parliament would ultimately have to agree to it. However, the change would be possible without the need for new primary legislation. Such matters would have to be looked at in the years that the triennial review takes place. Protection is provided in terms of further parliamentary approval being required. It is important to note that we absolutely envisage this as a backstop safeguard, only used if, as the result of a review—in which there would also be full consultation, as we have discussed in earlier clauses—it was decided to make the order restricting the sources of information that could be brought forward. 

An issue was raised about whether this would lead to problems with anonymity, and the protections that are outlined in clause 18 would still apply. A supplier could bring a complaint to the adjudicator if proposed new section 4A was in place, but they would still be able to be treated anonymously by the adjudicator. It is fair to recognise that that one additional layer of confidentiality or anonymity—if the complaint were made through the trade body—would be gone were this enacted, but the overall protection on anonymity would none the less still be there. 

3.30 pm 

Ian Murray:  The Minister talks about anonymity in a later clause, but surely she must appreciate—she said so herself—that removing the layer of trade associations or third parties removes a layer of anonymity. If someone is the only chanterelle mushroom producer in the country, a complaint to the adjudicator is hardly anonymous if the complaint is about chanterelle suppliers, of which there is only one to that supermarket. The Mushroom Growers Association could take a complaint to the adjudicator on the basis that it thinks that something is going on that is not directly related to that particular supplier, and therefore that supplier is protected. 

Jo Swinson:  I welcome the hon. Gentleman’s intervention. His knowledge of different mushroom types exceeds mine, but they are not my favourite food. In the scenario that he outlined, the chanterelle mushroom supplier would none the less have protection in terms of confidentiality. It would be up to the adjudicator to decide the terms of the investigation and they would be able to know that this was the only chanterelle mushroom supplier. For example, they might decide to undertake an investigation into all mushrooms—chanterelle, shiitake and various other types. My list of mushrooms is drying up. 

Lucy Powell (Manchester Central) (Lab/Co-op):  Porcini. 

Jo Swinson:  Indeed. There is a whole range. I hope that I have reassured the Committee. 

Ian Murray:  Deep fried. 

Jo Swinson:  I am very sad to hear that the hon. Member for Edinburgh South suggest deep-fried mushrooms, unwittingly confirming some of the worst stereotypes of Scottish food, which I wholeheartedly refute. I am sure he said it only in jest. 

My hon. Friend the Member for St Ives wanted further clarification on the drafting of proposed new section 4A(1) and (2). He pointed out that subsection (2)

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gives the adjudicator wide powers in terms of the information that they could consider from a wide range of sources, which would include trade associations. The difference is that that would be when they are carrying out an investigation and the trigger point is whether to carry out an investigation. 

This section gives a power if there is a real concern that the resources of the adjudicator are being clogged up by irrelevant or unnecessary information. As a public authority, the adjudicator would have a duty to respond to that in a reasonable manner. If they ended up in that situation, the Secretary of State, following a full review and consultation that went along with that review, could then make a recommendation. There would then need to be parliamentary approval for that, and that would mean that investigations could be triggered only by the different types of information outlined in proposed new section 4A(1). However, once an investigation has been triggered, any information would be able to be considered as part of the investigation. 

Andrew George:  I am grateful to my hon. Friend for clarifying that point. I understand that there is a narrow interpretation of what is appropriate at the point of deciding whether an investigation should be instigated. However, I am troubled by what the Minister said earlier, and indeed on many occasions. She said that the adjudicator should be left, as far as possible, with the discretion. Given that we have clause 13, which allows the adjudicator to review their powers, if they have been snowed under with too much evidence, they can define and indeed write their own amendment to the code. 

Rather than have a prescribed solution pre-prepared in advance of the event, is it not appropriate for the adjudicator to be given discretion to come up with their own solution and propose something that will work, instead of narrowing down their scope of manoeuvre? 

Jo Swinson:  We certainly want to give the adjudicator a wide range of discretion in what they will do. Clause 13, which we were discussing recently, will give the adjudicator the power to make recommendations to the Office of Fair Trading if they think any changes need to be made to the code. However, it will not give them any power to review what is in the Bill, which is, rightly, a matter for Parliament rather than the adjudicator. That is the real difference. If we did not include the proposed new section in the Bill, further primary legislation would need to be tabled. That would inevitably lead to delay, and we could end up with a situation in which the adjudicator was not able to be as effective as they would like to be. 

Returning to the process that would need to be followed in order for proposed new section 4A to come into force, we would need to have the triennial review, during which there will be a full consultation, which will include the adjudicator. They will not get to decide what powers are in the legislation, but they can propose what they think is necessary. The Secretary of State would then have to lay an order before Parliament, which would have to approve it. Only when all those steps have taken place would proposed new section 4A become part of the legislation. Significant hurdles have to be overcome. 

The hon. Member for Edinburgh South asked to what extent we think there will be lots of frivolous complaints and the extent to which the adjudicator will

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be snowed under. That is not necessarily what we would expect to happen. Clearly, the campaign groups and trade bodies that have been involved in arguing for the Bill have generally acted in an appropriate, helpful and reasonable manner. We would expect that to continue. It is important that the safeguard is present, not least because it will be a further incentive for everyone involved to raise issues with the adjudicator in a reasonable way, rather than deluge them with irrelevant or unnecessary requests for information. As a public authority, the adjudicator will be required to respond to such requests. We do not want all their resources to be used to respond to complaints that are not key to the focus that we want them to have. 

That is very much a hypothetical situation. The place of Committee is to debate and discuss the hypotheticals and to try to think through and anticipate what can happen. That is why we have included the provision in the Bill in conjunction with allowing more information to be considered in triggering investigations, which has been welcomed. Proposed new section 4A would put a safeguard in the legislation at the same time. It is probable—I very much hope that this will be the case—that it will never be necessary to use the power. However, the fact that it is present will provide a clear incentive for third parties to act responsibly while still playing an important role in contributing to the adjudicator’s work. 

I hope that that gives some reassurance to the Committee regarding the hoops that have to be jumped through before the power in proposed new section 4A may be used. It is intended only as a backstop safeguard. None the less, because of the changes we have made in allowing third party complaints, it will have some value. I hope that, on that basis, the hon. Member for Edinburgh South will be happy to withdraw the amendment. 

Ian Murray:  I am going to break with tradition, because I do not feel reassured by the explanation. I return to the point that I made when moving the amendment: I cannot see the point of subsection (10) in the first place. I would hope that trade associations and third parties—for example, the National Farmers Union—would act responsibly as a filter in the first instance before suppliers took action with the adjudicator. Not only would they wish to take cases that they think have merit, but they would want to protect their reputations and that of the adjudicator. In that sense, it is important that the adjudicator is able to take those examples. 

I understand the issue of being swamped, and I understand that this is a reserved power that the Secretary of State would only use after a triennial review. The Minister did not answer the question about how it would be removed from the Bill. Would another review period be needed for that to happen? Perhaps she will reflect on that. 

There is the issue of anonymity. I gave the example of mushrooms because supermarkets stock some very niche products. The adjudicator can trigger an investigation on the basis of a claim from a particular supplier, without a trade association providing the supplier with a second level of anonymity. I understand that the

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adjudicator will take a nuanced approach. If they thought that the confidentiality and anonymity of a supplier could be compromised, they might widen the scope of an investigation to the whole of a particular product range. They might investigate all mushrooms, for example. However, that will not protect anonymity in all instances. If there has already been a relationship breakdown between a supplier and a supermarket, and there is an investigation into all mushroom suppliers to that large retailer, there may be a situation in which that relationship and that anonymity is compromised. 

I appreciate the distinction that the hon. Member for St Ives made between an adjudicator’s decision whether to carry out an investigation, and how it carries out the investigation. There is a distinction between those two things, which almost contradicts the need for the clause. What is to stop a trade association or a third party from approaching a supplier that it feels has a problem and saying, “I think you should approach the adjudicator to see whether it will trigger an investigation”? When the investigation is triggered, the third party or trade association can supply evidence. In that sense, there is no safeguard if the Secretary of State decides to use this power. Although trade associations and third parties will be unable to petition the adjudicator to carry out an investigation, they can trigger an investigation through a supplier. Proposed new section 4A(2) allows them to supply information. That would seem to negate the need to have this proposal in the first place. 

I have not been wholly reassured about the clause. I am always incredibly uncomfortable when the Secretary of State is given an open-ended power to review something without steps being put in place to say why that should be the case. I appreciate that the Minister said that it would be in the context of the review, with all the review consultees that are included in the clause. However that is not what the clause says. It says that if 

“The Secretary of State thinks that it is desirable to do so” 

they will do it. That gives me some concern, based on the first draft of the Bill that we have seen. I will withdraw the amendment, reflect on what the Minister said and perhaps bring something to the House on Report. 

Amendment, by leave, withdrawn.  

Clause 15, as amended, ordered to stand part of the Bill.  

Clauses 16 and 17 ordered to stand part of the Bill.  

Motion made, and question proposed, That further consideration be now adjourned.—(Peter Luff.)  

The Chair:  Before we leave, I wish to say that Mr Williams will be taking both sittings on Tuesday, if there are two, which means that I shall not see you again on this Committee. I take this opportunity to thank you all for your courtesy and the manner in which this has been handled, and I wish you all a very happy Christmas. 

Question put and agreed to.  

3.44 pm 

Adjourned accordingly till Tuesday 18 December at five minutes to Nine o’clock.  

Prepared 14th December 2012