5 The Groceries Code Adjudicator
The role
of the GCA
34. There has been considerable pressure to consider
the role of the Groceries Code Adjudicator (GCA) and the Groceries
Supply Code of Practice in relation to how supermarkets deal with
suppliers, processors and producers. There has also been a good
deal of misunderstanding of the GCA's role. The GCA was set up
in 2013 to enforce compliance with the Groceries Code (after we
had, ourselves, conducted pre-legislative scrutiny of the Act
that created the post).[51]
She has no responsibilities in relation to the voluntary dairy
code discussed in the previous chapter. She deals with the relationship
between the top 10 UK retailers and their direct suppliers.
35. Confusion exists over what precisely the GCA
can do in respect to dairy products: in fact, because of the structure
of the milk supply sector, only about 3% of milk producers are
direct suppliers to retailers and the vast majority are, therefore,
not covered by the Groceries Code. [52]
The GCA has no role in influencing prices offered to farmers for
milk and other dairy products. The GCA herself, Christine Tacon,
told us: "I think very many farmers thought I was going to
be there to get involved with price. I have been asked to get
involved in the price of beef and milk and fleece. None of these
can I get involved with: first, because I cannot get involved
on price, and secondly they are very rarely direct suppliers themselves".[53]
REVIEW OF THE GCA
36. The GCA's role is not due to be reviewed before
2016, by its parent department, the Department for Business, Innovation
and Skills. The farming Minister told us that, with the GCA being
little over a year old, it made sense to give time for its operations
to be judged before being reviewed.[54]
We have heard calls for that role to be reviewed sooner, however,
and for the GCA's remit to be extended to include relationships
all the way down the supply chain, so that the relationships between
milk producers, processors and the ultimate retailer could be
considered. The NFU dairy board chairman Rob Harrison believes
that extending the remit that way could clarify how supermarkets
operate in relation to milk and other dairy products.[55]
David Handley of Farmers for Action agrees: "Where we come
adrift is we cannot track the money between the retailer and the
processor, and that is where I think the adjudicator needs to
be given the teeth to be able to do that".[56]
The call for extension of the GCA's remit also wins support from
the Royal Association of British Dairy Farmers, Dairy Crest Direct
and the Farmers Union Wales.[57]
37. There is less support for any such change among
producers, with Arla Foods, for example, noting that "a strong
case has not been made for this, given that many of the practices
the adjudicator seeks to eliminate are not typical in the supply
of milk".[58] The
Secretary of State for Environment, Food and Rural Affairs has
also ruled out a change: "It would not be appropriate to
extend the statutory framework of the Groceries Code Adjudicator.
[…] To extend the remit of the GCA to cover indirect suppliers
would mean amending the 2013 Act setting it up and this would
require evidence that its current remit was insufficient. In any
case, the market and how it is influenced by overall production
and demand volatility will always be the main factor for prices
received". [59]
38. We believe that the terms under which the
Groceries Code Adjudicator may operate are too restrictive and
that a means must be found to protect suppliers of products to
major retailers whether or not they are direct suppliers, as under
the current arrangement. We note that the Government is committed
to review the operation of the GCA in 2016 but we recommend urgent
consideration of how the GCA remit can be extended to incorporate
suppliers throughout the supply chain.
39. We repeat the recommendation we made when
the Groceries Code Adjudicator was created that she should be
able to accept complaints from indirect as well as direct suppliers.
40. We note that the GCA has not yet conducted
an investigation. Following our own pre-legislative scrutiny of
the Bill which created the Groceries Code Adjudicator, we recommended
that she should have the power to launch pro-active investigations
as well as respond to complaints, and we repeat that recommendation
now.
THE POWERS OF THE GCA
41. Although the GCA has no direct remit in relation
to dairy prices, our inquiry has revealed that she is at present
unable to use her power to fine a retailer in breach of the Groceries
Code because the Government has spent more than a year failing
to set a maximum level of fine. Christine Tacon told us that she
made a recommendation to the Government last December, having
previously consulted on whether a fine of up to 1% of an offending
retailer's turnover should be the appropriate level.[60]
The Government, via the Department for Business, Innovation and
Skills, is required to enact a statutory instrument to bring that
level of fine into play, but has not yet done so. Cross-ministerial
discussions are now under way, but there has been no guarantee
as yet of whether the GCA will be given the power necessary to
conclude an investigation by fining a miscreant retailer within
the present Parliament.
42. We find it extraordinary that the Government
has left the Groceries Code Adjudicator for more than a year with
no practical ability to use her legal powers. We recommend that
a statutory instrument setting out the level of fine the Groceries
Code Adjudicator may levy be laid within the remainder of the
present Parliament. We seek a clear explanation of why the GCA
has been left so long without the teeth she needs to do her job.
51 Letter to the Chair of the Business, Innovation and Skills Committee
from Miss Anne McIntosh MP, Chair of the Environment, Food and
Rural Affairs Committee, 22 June 2011 (Pre-legislative scrutiny
of the Draft Groceries Code Adjudicator Bill) Back
52
Arla Foods UK (DAI0008) Back
53
Q54 Back
54
Q102 Back
55
Q26 Back
56
Q26 Back
57
Royal Association of British Dairy Farmers (DAI0007), Dairy Crest
Direct (DAI0005), Farmers Union Wales (DAI0002) Back
58
Arla Foods UK (DAI0008) Back
59
Letter to the Committee, 27 October 2014, from the Secretary of
State for Environment, Food and Rural Affairs Back
60
Q63, Q68 and Q69 Back
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