The hon. Gentleman makes an important point. The Competition Commission was very clear that innovation could be stifled by the potential anti-competitive practices in the sector, so it absolutely follows that encouraging innovation by ensuring that no anti-competitive practices are going on will allow consumers ultimately to get a better deal, and that is in their interests.
A few red herrings were put forward on the question of whether Esso and tobacco companies would be protected in some way by this. I refer hon. Members, as the right hon. Member for South East Cambridgeshire (Sir James Paice) did, to the Groceries (Supply Chain Practices) Market Investigation Order 2009, which is very clear. It states, on page 3:
“Groceries means food (other than that sold for consumption in the store), pet food, drinks (alcoholic and non-alcoholic, other than that sold for consumption in the store), cleaning products, toiletries and household goods, but excludes petrol, clothing, DIY products, financial services, pharmaceuticals, newspapers, magazines, greetings cards, CDs, DVDs, videos and audio tapes, toys, plants, flowers, perfumes, cosmetics, electrical appliances, kitchen hardware, gardening equipment, books, tobacco and tobacco products”.
That is what was found to be relevant through the Competition Commission’s investigation. I think that it is important to note for the record that some of those earlier red herrings were just that.
The hon. Member for Ogmore said that the adjudicator’s office would not involve huge costs. It is estimated that the costs of running it, including all running costs and staff salaries, will be £800,000 a year. As for how much of that is for the adjudicator themselves, they are currently acting as adjudicator-designate for one day a week on £23,000 a year, going up to three days a week on the same rate once we have Royal Assent and commencement, as we very much hope we will.
On new clauses 4 and 5, it is fundamentally right that large supermarkets should treat their suppliers fairly wherever those suppliers are located. The Competition Commission’s finding of decreased innovation and investment in the supply chain is likely to result from unfair treatment of suppliers and to cause detriment to consumers, regardless of whether those suppliers are outside the EU or the UK. Excluding overseas suppliers would therefore not be helpful to the fundamental purpose of the provision and would, indeed, undermine it. The code and the adjudicator complement each other and so they need to have the same scope. I resisted in Committee amendments that would have expanded the adjudicator’s role beyond merely enforcing the code, but I must now also resist amendments that would limit the adjudicator’s scope to being narrower than the code. I hope that my hon. Friends will withdraw their amendments, but if they choose not to do so I will advise colleagues to vote against them.
3.30 pm
I turn to amendments 34 and 35, tabled by the hon. Members for Edinburgh South (Ian Murray) and for Ogmore. I absolutely recognise and share the outrage of MPs and the public about the recent horsemeat scandal. Of course it is wholly unacceptable if people buy products marked as beef that turn out to contain horsemeat. Consumers must be the absolute priority, and they need to be confident in the food they buy. The safety issues have been well explained by the Minister of State, Department for Environment, Food and Rural Affairs, my hon. Friend the Member for Somerton and Frome (Mr Heath). Food labelling is incredibly important. I myself suffer from a very severe allergy to nuts, and I completely rely on labels on food products being accurate in order ultimately to stop me from having a life-threatening anaphylactic reaction. There are very important reasons why this is very serious and is being taken as such. That is why my ministerial colleagues in DEFRA have taken strong and decisive action—action with food businesses, action in Europe, and action in tracking down the people who have caused this and bringing them to justice. As Members will know, the Food Standards Agency’s investigations have already led to arrests, and Ministers and the FSA are working with scientists, inspectors and food businesses in Britain and across Europe to ensure that this does not happen again.
However, while those recent incidents have been appalling, they are not a matter for the adjudicator. Expanding the adjudicator’s role to consider these issues would not be
helpful. It would lead to counter-productive duplication with the FSA; it is not where the adjudicator’s expertise will be developed; and the office is not being set up to look at competition issues. What the adjudicator does in promoting productivity and investment in the food chain or the supply chain might help to create an environment where such scandals are less likely to happen, but that is the extent of their role in the current horsemeat scandal; it is very different from their actually enforcing these matters.
On reporting, in Committee we had requests for a variety of different issues to be included in the adjudicator’s report, such as available resources, recommendations to the Office of Fair Trading, and monitoring compliance. It was even suggested that they should have to report on cartel activity. Of course, if they came across any criminal activity they would be expected to report it to the police. However, we want to make sure that the reports will be sensible documents rather than being about a tick-box exercise with a list as long as your arm of the things that they have to include. On that basis, I ask hon. Members to withdraw the amendments. I hope they agree that I am being even-handed and consistent on the subject of the adjudicator’s scope and role.
Amendments 30 and 33, also tabled by the hon. Members for Edinburgh South for Ogmore, are of a slightly different nature. They prescribe what the adjudicator should consider under clause 13 when they assess whether changes to the code should be recommended to the Office of Fair Trading. In Committee, a particular concern was raised about Asda and a foreign subsidiary that had been set up—I think it was called IPL. I can reassure the House that large retailers are required by the order as it stands to procure in such a way that all their subsidiaries comply with it as though they themselves were bound by it. That includes incorporating the code into supply agreements. If that did not happen, it would constitute a breach of the order by the large retailer, which is named in the order. I think that that provides protection that can give Members some reassurance.
In Committee, we discussed at length the code’s territorial extent, and I hope that I gave substantial assurances at that time. We also discussed whether the code should be extended to intermediaries. I do not plan to revisit those arguments, but the fundamental question is whether it is appropriate to single out two particular issues for the adjudicator to focus on when considering any changes to the code. My view is that that is not the best way to progress. Clause 13 is widely drafted, and rightly so. That means that if the adjudicator considers it appropriate for any changes to be made to the groceries code, he or she—it is a she at the moment—must recommend them to the Office of Fair Trading. To single out specific issues would weaken the clause, rather than strengthen it.
Singling out intermediaries would be particularly inappropriate, because it is unlikely that the code could be amended to include them without a further investigation by the Competition Commission. The reason for that is that the legal framework under which the order can be amended is set out in section 161 of the Enterprise Act 2002. It states that, in order for that to happen, there must be a change in circumstances—for example, a new, abusive practice by retailers—and, indeed, that that change must relate to the initial adverse effects found by the Competition Commission, namely the passing of excessive risk and unexpected cost to suppliers. It is
unlikely that those conditions would be met with regard to intermediaries. It is more likely that this could be extended to uncover another abusive practice similar in nature and effect to those already described in the code but that was not present in the market when the Competition Commission did its initial investigation.
This group of amendments also includes a set about the operation and review of the adjudicator. Amendment 3, tabled by the hon. Member for Hayes and Harlington (John McDonnell), would require the OFT to respond to recommendations. I do not believe that that is necessary. I appreciate that the hon. Gentleman has looked at what was said in Committee, where we discussed the issue in detail, but the OFT has a general duty to act reasonably, which includes a duty to respond to members of the public and other public authorities where appropriate. This is about creating a system that is not overly prescriptive for the adjudicator, while recognising that they will discharge that public duty in a responsible way.