Clause 7 - Investigations: enforcement using recommendations

Groceries Code Adjudicator Bill [Lords] – in a Public Bill Committee at 3:30 pm on 11th December 2012.

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Photo of Andrew George Andrew George Liberal Democrat, St Ives 3:30 pm, 11th December 2012

I beg to move amendment 35, in clause 7, page 2, line 36, at end insert—

‘(2A) If the Adjudicator determines that a recommendation has not been, or is not being, followed, the Adjudicator may issue a requirement notice to the large retailer in which the Adjudicator may set out one or more recommendations with which the large retailer must comply. Such requirement notice may in the Adjudicator’s discretion contain a time period for compliance and an indication of which other form of enforcement the Adjudicator envisages might be imposed in the event of continued non-compliance.’.

As I have an Adjournment debate in Westminster Hall at 4 o’clock, I need to be brief—I am sure hon. Members present are greatly relieved to hear that—so I will not be taking any interventions, in case anyone wants to have a laugh. I can assure the Committee that the amendment is probing.

In a sense, the amendment reflects back to the debate that we had on the strength of recommendations and the capacity to escalate from recommendations, rather than end up in a cul-de-sac of recommendations with  which retailers fail to comply. It would simply add a tier above recommendation—requirement—which has further requirements within it; in other words, recommendations with which the large retailer must comply.

As we debated earlier, I entirely recognise that on some occasions where there has been an identified breach for which a recommendation is appropriate, it will be entirely appropriate for the retailer to propose an alternative resolution to the breach, rather than follow to the letter the adjudicator’s recommendation. As I said, the amendment is a probing one, on which the Minister might like to reflect as a way to address what I think might be a weakness in the current arrangements for managing recommendations in the way we debated under clause 4.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

I support at least the spirit of the amendment, particularly as it deals with compliance within a set period of time. Had I intervened on the hon. Gentleman, I would perhaps have probed him on what he considers to be a reasonable time for compliance. In any case, he was right to make the point.

When we are looking at an efficient supply chain and at genuine grievances from part of that chain, what people will not want is to be hung out to dry as their businesses and livelihoods suffer. Therefore it is wholly reasonable to expect any recommendations to be implemented within a reasonable time frame.

The Minister has full confidence—I agree with her—in the adjudicator’s discretion in so many ways that it should be within that discretion to stipulate the time frame that is reasonable. The adjudicator would not do that completely off their own bat, but would take soundings from stakeholders and come to a measured and considered conclusion. Their ability to make not only recommendations for improvement but a time scale would hold organisations properly to account and give some hope to those who have genuine grievances that they are not being well served by the code that their issues will be resolved within a proper time frame.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

I want to probe my hon. Friend’s probing of the probing amendment. Is it not the case that we do not want to create a situation in which the adjudicator monitors the implementation of the recommendation within a time frame with no end? Having a specific time frame would allow the adjudicator to say, “We will go and examine the issue again after three months,” and give a focus, rather than a scatter-gun approach, which may take up a lot of resources.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

I agree entirely. It is not without precedent for those reaching balanced decisions on measures of mitigation in any industrial sector to say, “Here is a reasonable time frame. We expect you to deliver within that period.” That gives certainty. The most hopeless situation is for someone caught in the supply chain to continue to suffer from the grievance that has been raised and investigated and on which recommendations have been made, while the perpetrator says, “We will get round to that as and when we can.” That would be an absolute travesty of the whole spirit of this good Bill.

Another aspect that I would have probed—there is far too much probing going on—is the quite neat idea of asking the adjudicator to propose other forms of  enforcement in the event of continued non-compliance. That comes back to the previous amendments tabled by the hon. Member for St Ives about what happens if non-compliance continues or the retailers decide, for whatever reason, not to implement the measures fully. It is reasonable to ask the Minister whether, in those circumstances, the adjudicator could say that he would implement plan B, for want of a better phrase, given that he had anticipated such an outcome, having had previous experience of such matters.

The amendment is reasonable, but I hope that the Minister will say that there is no need for it because she would fully expect the adjudicator to set down time scales by which the recommendations would be put in place. We have had a good debate, and I accept that the hon. Lady wants a light touch taken to such matters, but I am starting to worry a little that the step back taken by the Government might result—without adequate words on record or adequate letters of exchange between the Minister and the adjudicator or without further guidance from the Minister to the adjudicator—in a rather weaker adjudicator than we imagined who does not do what the Minister intended.

The amendment goes to the heart of the problem. If the Minister says that it was not necessary, because she fully intends the Bill’s measures to comply with such provisions, I want that adjudicator to bring forward time scales on all the recommendations. If that proposal were complied with, I shall be happy. However, if she says that it will be left to the discretion of the adjudicator as to whether time scales will be imposed, that would be a worry for stakeholders along the entire supply chain. It will also give large retailers the certainty that they will not be constantly harried in the court of public opinion or be called into the Secretary of State’s office month after month, as they will know that they have to deliver by a certain date.

Photo of Andy Sawford Andy Sawford Labour, Corby 3:45 pm, 11th December 2012

I take my hon. Friend’s point about certainty for large supermarkets, but does he agree that time scales are even more important for small suppliers and others that we want to protect? Large supermarkets have such resources and capacity that longer time frames will not concern them in the same way as they would the small suppliers. That is my primary worry, although I accept what he said about the large retailers.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

My hon. Friend makes a good point. The primary worry of the hon. Member for St Ives when he drafted the amendment was the producers in the supply chain. Given the meeting that my hon. Friend the Member for Corby and I had with farmers in his constituency, I know that they would support the spirit and the letter of the amendment, as it gives them certainty. It would not result in heavy-handedness. There could still be a light touch. The proposal would simply mean that, when measures are recommended by the adjudicator, they are delivered in an appropriate time scale. That would be fair and reasonable, and I hope that the Minister will provide certainty. The hon. Member for St Ives has once again probed, and I hope that he will be able to withdraw that probe because he is completely satisfied with the Minister’s reassurances.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

Let me give credit to the hon. Member for St Ives. The amendment is the best that has been tabled to the Bill so far. I wish that he would press it to a Division, but he probably will not. By the time we reach the situation envisaged in clause 7, the retailer has been found guilty of a breach somewhere along the line, so the adjudicator has decided to find a recommendation to remedy the problem.

Let us consider the time scales to which my hon. Friend the Member for Ogmore drew attention. It could be the case that a certain remedy has been put forward in a recommendation by the adjudicator to a retailer. The retailer could decide to ignore it or not act on it, because the contract may be up for renewal or coming to an end. It could be an incredibly profitable part of the contract, and the retailer might say, “I will remedy this, Mr or Mrs Adjudicator, but not for six months, because the contract will be up in any case and the remedy that I put in place will have no detrimental impact on the breach of the code for which I have been found guilty.” We have to ensure that that remedy is put in place. The time-scale issue raised by the amendment is critical.

The hon. Member for Corby is absolutely right: it is also beneficial for the retailers, because it gives them a focus. They can look at a recommendation and act on it immediately, rather than allowing it to drift. The Minister has raised concerns about the adjudicator’s resourcing and not wanting it to be swamped. If the adjudicator has a time frame of three months for a recommendation, at two months the adjudicator could have an update report on what is happening and on that third month decide whether that remedy has been looked at. We must ensure that the recommendations are not open-ended.

The final part of the amendment would allow the adjudicator to give an indication of other forms of enforcement. After the two-month period in my example, they can say, “Unless this is remedied by the third month or by the time this contract comes up for renewal, I will be forced to name and shame, or fine. If I look to escalate this to a fine, I will ensure my recommendation is that it is well in excess of the financial benefit your company is getting through breaching the code.”

The amendment is very important. I appreciate that it is a probing amendment, but I hope the Minister will reflect on it. If the Minister does not provide comfort that the issue will be brought back on Report, I hope that we will all end up in the same Lobby together. I look forward to that.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I am cognisant of the fact that my hon. Friend the Member for St Ives has to leave. I hope that I will be able to meet the challenge of ensuring that the Committee is no longer concerned about this issue in the three or four minutes before he has to go. He has a meeting at 4 o’clock.

The amendment is similar to some of the discussions we had this morning, such as the one on amendment 20. Amendment 35 would have the de facto effect of making recommendations binding. As I said this morning, it is important that the enforcers have a range of sanctions. The recommendations are deliberately intended to be the lightest touch of the sanctions that the adjudicator has at their disposal. There are difficulties with making recommendations binding, because they may not be the only way in which compliance can be achieved.

To take another example—we talked about Bob this morning—I will talk about Ian, who is a senior savouries buyer for one of the retailers. He systematically instructed his staff significantly to breach the code on promotions. He did not let his manager know and covered it up. A complaint was raised by a pork pie manufacturer, the retailer was found to be in breach with that promotion and was subject to a heavy fine. Practices around other promotions, however, were generally good where Ian was not leading them. The adjudicator in that case may recommend extra training and mentoring for Ian, but if the retailer thought Ian’s attempts deliberately to cover up the breaches counted as gross misconduct, they might decide to sack him instead. The recommendations for additional training and mentoring could therefore not be implemented, but the overall objective of compliance with the code would be met by what the retailer decided to do. That is another example of how the adjudicator cannot always know best about how retailers can right the situation. Making recommendations makes sense, but making those binding could lead to a perverse situation if other ways of complying with the code are employed.

Huw Irranca-Davies rose—

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Order. I am acutely aware that the hon. Member for St Ives has a time scale problem. It just so happens that the amendment is in his name. It would be helpful if he indicated whether he wants to withdraw the amendment. I have to remind the Committee that the amendment, having been moved, is now the property of the Committee. If he leaves the room, it remains the property of the Committee and another Member may press it to a vote.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

I am grateful to you, Sir Roger, for that instruction. I was going to leave it in the gift of my hon. Friend the Minister as to whether she felt that I would be satisfied with her response. I have absolute confidence in her ability to make that particular judgement. It was not my intention, as I made clear earlier, to press the amendment to a Division, but to advance it as a probing amendment with the possibility that we may be able to come back to it at a later stage. There was no intention to be discourteous to Sir Roger or the Committee, but I will leave in one moment.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

We all understand the pressures on hon. Members.

I call Mr Irranca-Davies.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

I fully understand why the hon. Member for St Ives has to leave.

I was seeking to intervene, as I wished to ask the Minister why, if the adjudicator can make recommendations which relate to a particular individual, and that individual is sacked, what difference does it make if that recommendation comes with a time scale? The individual has been sacked.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I was not commenting on a particular time scale, but on the general issue about making recommendations binding. However, I shall deal with  the time-scale issue that the hon. Gentleman mentions, as it is an interesting point. There is nothing to stop the adjudicator making a recommendation that a particular course of action should be taken within a set time. As the recommendations are not intended to be binding, that provision will not be binding. However, I agree that it certainly could be something which would be very helpful, not least in giving clarity to both parties—the supplier and the retailer. For example, if a more in-depth training was recommended, that might not be something that could be expected to be completed in a week or two. There might be value in setting out what would be a reasonable time frame.

The adjudicator absolutely will have the discretion to be able to do that, and I accept that it is something which could be helpful. I remind the hon. Gentleman that we had a debate this morning on schedule 1 in which we discussed the possibility of pre-appointment scrutiny for the adjudicator. One of the criteria we discussed as to why that would be useful, and which was citied by various Opposition Members, was that that would show the independence of the adjudicator from Government. We cannot have an independent adjudicator if Ministers are going to set down in detail, or indeed in the Bill, exactly how they will operate. I am very happy to say that time scales for recommendations could sometimes be helpful, but at the same time I do not want to tie the adjudicator’s hands to suggest either that they must always include time scales, or indeed that that is a ministerial direction, because they need to be able to get on with the job themselves.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

I must have been such an interfering busybody as a Minister. I would not suggest that we interfere in any way with the independence of an adjudicator, regulator or anybody else, but I would invite the Minister to go further and to put on record that wherever appropriate it would be preferable for a time scale to be included. It is not giving undue direction to the adjudicator: it is saying that where it is logical, and where it is clear that a timetable could be put in place—it would not be binding, because the adjudicator is still independent—consideration should be given to such a measure wherever possible, because it gives certainty.

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

As I said a few moments ago, the inclusion of time frames in recommendations could certainly be helpful for suppliers and retailers alike, because it would help to manage expectations and set out what the adjudicator felt would be reasonable. I think we are slightly dancing on the head of a pin. I can see that it would be reasonable, but I do not want unduly to force the adjudicator to do that, because equally I can imagine that there will be circumstances in which, for whatever reason, the adjudicator takes the view that it does not make sense to set out time frames.

I am sure that whoever ultimately becomes the adjudicator is following our proceedings closely and will hear, not just what I said, but what the hon. Gentleman and other members of the Committee have said on this particular issue. We deliberately drafted the Bill to require the adjudicator to set out how they will operate in the guidance that they introduce, and that may well be something that they choose to take a view on in that guidance. In the process of developing that guidance, with stakeholders sending in their views, I am  sure that the hon. Gentleman’s views on the merits and desirability of time frames will be communicated for consideration by the adjudicator.

I dealt with escalation in the earlier debates but, with regard to the point that the hon. Gentleman made on time frames, I want to deal with a situation in which a supplier continues to suffer as a result of non-compliance with the code, and compliance is not enforced quickly enough. I accept that there has been a reluctance to enforce the code through contract law because of a climate of fear, but when the adjudicator is up and running and undertaking investigations, if they undertake an investigation and rule in favour of a supplier, that climate may be slightly lessened. If the supplier seeks redress that will still be a separate legal process—the adjudicator enforces the code; they do not give redress through their investigations—but a finding by the adjudicator would help to strengthen a case taken through the legal route. The supplier may have other options that enable them to seek redress, and by actively pursuing them they may create an incentive for the retailer to comply more swiftly with recommendations and to ensure that it is compliant with the code.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs) 4:00 pm, 11th December 2012

That is a helpful explanation. Has the Minister had, or would she seek from her team of experts, any advice on whether laying out the what-if scenario, the escalation scenario and other possible measures that could be used would reduce the risk of challenge from a large retailer? If the adjudicator says clearly to the retailer, with advance notice, what a reasonable timetable is on which to comply and, if it fails to do so, what will be coming down the line, does that reduce the risk of challenges—legal or otherwise—to the adjudicator’s decision by laying down a path of escalation should there not be compliance straight away?

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

That is a hypothetical situation, and it is right that we consider all potential situations. In terms of the risk of challenge, the hon. Gentleman will be aware that if recommendations are used, or the naming and shaming enforcement power, there will not be the full merits right of appeal; instead, it will be open only to judicial review. That is much narrower in the scope of the ability for challenge. If recommendations were attached to a fine—that could happen because the adjudicator can undertake more than one sanction at the same time—that would potentially leave them open to challenge. However, they will be required to set out, in guidance, how they will deal with those situations. We will have to wait to see how it will operate as it is slightly hypothetical at this stage.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

Very often in Committees we deal with the hypothetical in order to explore these situations. I can imagine a situation where an initial set of recommendations could be laid out by the adjudicator that say, “Should you not comply with this, be aware that financial penalties are coming down the track.” On that basis, the large retailer would have been forewarned, and I imagine that advice from the Minister’s legal office would be that forewarning mitigates the risk of a successful challenge against the adjudicator because of that forewarning; they were given an alternative. Before  the Minister returns on Report, will the she seek advice on whether forewarning about escalation may be to the advantage of the adjudicator?

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I am certainly happy to seek that further legal advice, but I will point out that that paragraph 43 of the explanatory notes is helpful in that regard. Although it states:

“There is no express sanction for failure to comply with a recommendation”— it also says,

“failure to show that a recommendation has been followed could trigger a new investigation or be taken into account when considering what sanction to impose following a future investigation.”

That states implicitly that not complying could lead to greater use of sanctions in a future investigation.

Obviously, the specifics of how the adjudicator wishes to set that out in guidance is for them to decide, but that power is clearly there. Legal advice or otherwise, it stands to reason that if a retailer is faced with a recommendation when it has been found guilty, and there is an action that it can take to comply but it knows that fines or naming and shaming are powers that the adjudicator retains, and if it does not follow the recommendation, it potentially runs the risk of being exposed to those fines, there is the incentive to comply with the recommendations.

I hope I have satisfied my hon. Friend the Member for St Ives. I am fairly confident that I have. I am sure he will confirm that when he reads the Committee’s proceedings; however he did intimate earlier that he was happy to withdraw the amendment.

Photo of Peter Luff Peter Luff Conservative, Mid Worcestershire

Having had the pleasure of working with my hon. Friend the Member for St. Ives on the Agriculture Committee over 10 years ago, I am well qualified to read his mind. I also heard his words and I would like permission to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.