Adjudicator Bill allows trade body complaints

THE new Grocery Adjudicator will be able to use evidence from third parties, such as farming unions, to initiative investigations into alleged unfair practices by supermarkets, under a new Bill published today.

The Government published the long-awaited Bill that will establish the new Groceries Code Adjudicator in the House of Lords on Friday (May 11).

In a victory for organisations and MPs who have campaigned on the issue, it strengthens the powers granted to the Adjudicator from measures included in a draft Bill last year, notably on the hotly contested issue of third party complaints.

With cross-party support behind it, the rapid publication of the Bill just two days after it was announced in the Queen’s Speech reinforces hopes of a relatively quick path through Parliament and increases the likelihood of the new body being in place next year.

Ministers said the Adjudicator, which will enforce the Groceries Supply Chain Code of Practice, would ‘beef up protection for farmers and suppliers in ensuring that large retailers treat them fairly by lawfully adhering to the code’. In particular the Adjudicator would be able to:

  • Arbitrate disputes between retailers and suppliers.
  • Investigate confidential complaints from direct and indirect suppliers, whether in the UK or overseas, and from third parties, to end the ‘climate of fear’.
  • Hold to account retailers who break the rules by ‘naming and shaming’ or, if Ministers agree it is necessary, fining supermarkets.

If a retailer is found to have breached the Groceries Code then the Adjudicator would have what Ministers described as ‘wide ranging powers to effect remedies’ such as:

  • Issuing recommendations to solve the dispute.
  • Naming and shaming the offenders by publishing information.
  • Imposing fines (but only if the Secretary of State considers that the other solutions aren’t working and grants the Adjudicator this power).

The decision to allow third party complaints came after two committees of MPs backed calls for this to be included in the Bill in reports last year.

British Retail Consortium food director, Andrew Opie claimed earlirer this week that this would ‘open retailers up to malicious campaigns and fishing expeditions from those without full knowledge of the agreements involved, at a great cost to all parts of the grocery supply chain’.

But NFU president Peter Kendall said the Government’s ‘strong stance against an intense lobbying campaign by retailers’ was a ‘just reward for the farmers and growers who had bravely stepped forward amid a climate of fear to reveal the unfair practice that were confirmed during the two major investigations carried out by the Competition Commission’.

“After years of campaigning, this announcement will be welcomed by suppliers and producers who, for too long, have been subjected to unfair practices by the major supermarkets,” said Mr Kendall.

The Bill does not grant the Adjudicator powers to fine retailers for breaches of the Code from day one. But it does give Ministers the option of adding this power without the need for new primary legislation if other remedies prove insufficient, which was not possible under the draft Bill. Mr Kendall said this was ‘good news for the supply chain as a whole’.

“Our main concern now is that the Bill becomes law at the earliest opportunity and receives proper but swift scrutiny as it passes through Parliament,” Mr Kendall said.

Business Minister Norman Lamb said: “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.”

“The large supermarkets have a lot of buyer power, and with power come responsibilities. Supermarkets will still be able to secure the best deals and to pass the benefits on to consumers, but they should also treat farmers and suppliers fairly and lawfully. This means paying them on time or not being able to scrap arrangements with farmers and suppliers at the drop of a hat.”

Farming Minister Jim Paice said: “The Grocery Code Adjudicator will ensure fair play in the food supply chain to make all terms fair and balanced. The food industry is vital to our economy and this Government is committed to ensuring that all sectors of it are able to thrive while providing the best value and quality for consumers.”

Food and Drink Federation Director General Melanie Leech, said: “We need an effective Groceries Code Adjudicator to enforce the Groceries Supply Code of Practice and ensure suppliers have the confidence to come forward directly or through their trade associations.

“The Competition Commission findings were clear that unless the abuse of market power is addressed then businesses especially small and medium sized manufacturers will be less inclined to innovate and invest. We believe an Adjudicator will help to ensure that the food chain operates fairly and in the best interests of consumers in terms of choice and availability”.

The Groceries Code applies to the 10 retailers with a turnover in the groceries market in excess of £1bn. ode was put in place by the Competition Commission in 2008 and obliges large retailers to:
- deal fairly and lawfully with their suppliers;
- not vary supply agreements retrospectively, except in circumstances beyond the retailer’s control which are clearly set out in the supply agreement; and
- pay suppliers within a reasonable time.
In addition, the Groceries Code:
- limits large retailers’ power to make suppliers change their supply chain procedures;
- limits large retailers’ power to make suppliers pay marketing costs and compensation for wastage;
- requires large retailers to pay compensation for forecasting errors in certain circumstances;
- limits large retailers’ power to make suppliers obtain goods or services from third parties who pay the retailer for that arrangement;
- limits large retailers’ power to make suppliers pay them for stocking their products;
- limits large retailers’ power to make suppliers pay for promotions;
- requires large retailers to take due care when ordering for promotions;
- limits large retailers’ power to make suppliers pay for resolving customer complaints; and
- limits large retailers’ power to ‘de-list’ suppliers in other words, to stop dealing with a supplier or make significant reductions to the volume of purchases from a supplier.

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