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Clause 12 - Guidance

Groceries Code Adjudicator Bill [Lords] – in a Public Bill Committee at 12:30 pm on 13th December 2012.

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Amendments made: 7, in clause 12, page 4, line 20, leave out ‘and’.

Amendment 8, in clause 12, page 4, line 22, at end insert ‘; and

(d) the criteria that the Adjudicator intends to adopt in deciding the amount of any financial penalty under section 9.’.—(Jo Swinson.)

Photo of Andrew George Andrew George Liberal Democrat, St Ives

I beg to move amendment 39, in clause 12, page 4, line 25, at end insert

‘including monitoring compliance with the Groceries Code.’.

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

With this it will be convenient to discuss the following:

Amendment 41, in clause 14, page 5, line 12, at end insert—

‘(d) the Adjudicator’s assessment of large retailers’ compliance with the Groceries Code.’.

Amendment 36, title, line 2, after ‘Code’, insert ‘monitoring it’.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

We are accelerating the pace, and it is my intention to keep that up. These three amendments are intended to address the adjudicator’s role in monitoring not only the operation of the code but the context in which it operates.

In my parliamentary career, I have never been able to fathom why amendments are debated in the order they are, and not necessarily in what I would consider a logical, clause-by-clause order, or why those relating to one clause are debated with another clause. Equally, my amendment 36 is found right at the end of the amendment paper, even though it refers to the very first line of the Bill—indeed, the title. That aside, all three amendments, taken together, address the adjudicator’s monitoring role.

As I said in earlier debates about the adjudicator’s purpose, it is a great pity that the supermarkets had not embraced the introduction of an adjudicator, because it is in the interests of consumers and, ultimately, of the supermarkets. Had the supermarkets embraced the adjudicator, they could have seen that role develop into that of a fair trade regulator. The adjudicator would produce annual reports and could ultimately give charter marks that stood outside the stores to reassure customers that the supermarkets were fair trade retailers.

I do not mean “fair trade” in the sense that supermarkets put at the end of some aisles a sign for fair trade items or place them in certain locations, and point a finger at themselves and say, “We are good boys and girls, really”. It could be an ethos that would unpin the entire actions of retailers, something that they could extol and which would independently be verified by the groceries code adjudicator or the fair trade regulator, as I would like the role to develop.

That is the context in which the amendments should be considered. The role of the groceries code adjudicator would be not only to encourage compliance and enforce the grocery code, but to monitor compliance with the code. Under the Bill, at present, the role is only to encourage and enforce the code, and the Secretary of State will monitor how the adjudicator will bring about compliance with the grocery supply code of practice.

We are missing a step, because I want the adjudicator to be able to state their view of whether the retailers are complying with the code and whether that has led to a reduction in the transfer of risk and unexpected costs, the term used by the Competition Commission, and justifies the setting up the code and the role of adjudicator. That role is not required of the adjudicator, yet the Secretary of State will review how well the grocery code adjudicator has operated. We are missing a step, which is to review the retailers’ general compliance with the code. I tabled the amendments for that purpose, because it would be sensible of the Government to accept them as they would empower the adjudicator to have that over-arching brief.

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 12:45 pm, 13th December 2012

I thank my hon. Friend for tabling the amendments and for enabling further discussion of monitoring compliance with the code. The amendments would explicitly extend the adjudicator’s role to monitoring compliance, but he will be aware that that is already the responsibility of the Office of Fair Trading under section 162 of the Enterprise Act 2002 and article 10 of the Groceries  (Supply Chain Practices) Market Investigation Order 2009. They provide an explicit and statutory duty on the OFT, and to insert into the Bill a parallel duty on the adjudicator would create duplication and would not be the best use of public resources.

Under the Bill, the role of the groceries code adjudicator will be to enforce the groceries code and encourage compliance with it. In the course of taking such action, the adjudicator will do many things, including carrying out arbitrations and investigations, giving advice, publishing guidance and producing an annual report. Indirectly, such activities will provide information about compliance with the code. When the adjudicator undertakes an investigation, the findings will obviously determine whether a particular retailer is breaching the code. The annual report will bring together in published form and in detail all the arbitrations and investigations that have been carried out. The adjudicator will report on various aspects of how the code is being complied with.

I direct the Committee to paragraph 56 of the explanatory notes, which states:

“Each annual report should therefore contain information which is useful to the Office of Fair Trading in monitoring the Groceries Supply Order and the Secretary of State in reviewing the Adjudicator under clause 15, as well as to users of the Groceries Code generally.”

Information collected by the adjudicator will be helpful, but we should not duplicate a requirement of monitoring compliance with the code. That is a power for the OFT. It is important to keep those two powers separate, although, as I said, there is information that may be useful to the OFT.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

That clarification is helpful. However, it raises the question of the nature of the relationship between the adjudicator and the OFT. I am not sure how the OFT could undertake the monitoring role without having private conversations with the adjudicator. The adjudicator will not only have the published material but will have to provide a lot of private material to the OFT. In effect, it will be ghost-writing the OFT’s monitoring report.

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

My hon. Friend mentions the information that the OFT would require to monitor the code properly. Of course, it already has a great deal of power to require information. It has a general duty to monitor the operation of the order and consider whether that needs to be changed. Article 7 of the 2009 order requires retailers to provide the OFT with information to monitor and review the operation of the order, so the OFT already has powers to get that information. All I am saying is that what the adjudicator can provide will be additional and helpful. I am sure that in the light of published investigations, the OFT will take an interest in progress and in the findings that have been made as it undertakes and fulfils that general duty. The OFT has the ability and the powers to do that, and it is assisted by the annual report. If the groceries code adjudicator has information such as my hon. Friend mentions in addition to the published reports, the Enterprise Act 2002 allows it to pass further information to the OFT. I hope that reassures him.

The triennial review provides another point at which the adjudicator’s effectiveness at enforcement of the code will be considered. That will also provide information  about how the code is complied with. I come back to my main point, which is that the responsibility lies with the OFT. The adjudicator can certainly assist in some ways, but it is best not to duplicate that responsibility, which would cause confusion and not be the best use of resources.

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

My point is related not directly to the amendments but to the clause itself. To avoid duplication, will the Minister consider removing that power from the OFT and giving it to the adjudicator? Has the Minister or the Department considered that move as the referee comes in?

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

It is appropriate for the OFT to retain that power because it is well placed and resourced to do so. The groceries code adjudicator that we are setting up will have a narrow set of functions. The competition authorities are best placed to enforce and monitor compliance with the orders that they have brought into being. I think there has been a lot of agreement in the House on that principle, including from the previous Government. The point has been made and, if nothing else, considered in this short debate in Committee, but the Government’s firm view is that it is right for the OFT to have the remedies, as it is a strong organisation.

The competition landscape is obviously changing, and the Competition Commission and the OFT will be merged into the Competition and Markets Authority, but that is the right place for the compliance functions to lie. That is not to undermine or belittle the important role that the adjudicator will have in encouraging retailers to meet their legal obligations under the code by using its investigative powers. I hope that I have been able to reassure my hon. Friend the Member for St Ives, and that he will withdraw the amendment and we can move on.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

I am grateful to my hon. Friend for her comments on my amendments. Clearly, I must reacquaint myself with section 162 of the Enterprise Act 2002 in order properly to reflect on her comments. I  am grateful to her for offering to give it to me while I am speaking, but I will reflect on it later. However, on whether the adjudicator or the OFT undertakes the monitoring role, frankly, I do not mind who does it. It could be the adjudicator, the OFT or Father Christmas, as long as that function is undertaken by someone.

I am afraid I am going to say something critical of the OFT. My main concern is that those who have been involved in the pursuit of what we have always argued is necessary regulation of the sector and the supply chain have been monumentally disappointed by the reaction of the OFT over the past decade. It is only as a result of the phenomenally professional work undertaken by the Competition Commission, not the OFT, that we are where we are today. Quite frankly, if it was left to the OFT, we would still be light years away from the sort of sensible measure we have before us. Nevertheless, I hope that the reformed OFT with the adjudicator embedded in it will recognise the import of its role, that that relationship works well and that the monitoring role will draw regulation in the direction that I indicated earlier.

Finally, the Minister mentioned article 7 of the 2009 order. In fact, the order refers only to the supply of information by retailers to the OFT, not to the adjudicator—or to the ombudsman, as it would have been at that time. Nevertheless, it has been useful to advance the point. I hope that the Government will consider it further and ensure in their conversations with the OFT and the adjudicator that the important monitoring role will be recognised and acted on in the way I have described. I therefore beg to ask leave to withdraw the amendment.

Amendment,byleave,withdrawn.

Amendmentmade:9, in clause 12, page 4, line 31, leave out subsection (4).—(JoSwinson.)

Ordered, That further consideration be now adjourned.— (StephenCrabb.)

12.59 pm

AdjournedtillthisdayatTwoo’clock.