My Lords, this group of amendments goes to the very heart of the Bill. It concerns whether or not there should even be a groceries code adjudicator, or whether oversight of the code should continue to rest with the Office of Fair Trading. It is therefore only fitting that we should debate it early on, and I thank the noble Viscount, Lord Eccles, for raising it. I also thank him for allowing us to discuss all these amendments in one go. I also thank the noble Lords, Lord Borrie, Lord Razzall, Lord Curry, Lord Knight and Lord Howard, for their contributions to this debate.
I will not repeat all that I said at Second Reading. I know that the majority of us here support this Bill. Suffice it to say that, in its 2008 report on the supply of groceries, the Competition Commission found that the buying power of large supermarkets was potentially a cause for concern. It found that retailers were transferring excessive risks or unexpected costs to their suppliers, a practice that was likely to lessen suppliers’ incentives to invest and innovate, and that this would operate to the long-term detriment of consumers.
The Competition Commission therefore made an order that required large retailers to incorporate the Groceries Supply Code of Practice into their contracts with suppliers. It also recommended that an independent groceries code adjudicator be established to enforce the code and ensure that it was effective.
The adverse effect on consumers is not something expected to follow immediately and directly from a specific action by a retailer. Rather, the transfer of excessive risk or unexpected costs lessens incentives for innovation and investment, and the reduction in innovation and investment is what causes consumers harm.
This is a long-term effect and not one that can easily be measured—and not one that we should stop to measure before we have even implemented the measures recommended by the Competition Commission. I ask noble Lords to note that in the pre-legislative scrutiny the BIS Select Committee explicitly considered whether another review should be carried out, but
concluded that we should instead implement the recommendations of the Competition Commission as swiftly as possible.
On the point from the noble Viscount, Lord Eccles, about the report from the Office of Fair Trading, I will pass his concerns to the OFT. I remind noble Lords that the OFT operates independently of Ministers, but I will pass that on and see if we can get some result for the noble Viscount. He has referred to the fact that the members of the Competition Commission were not unanimous in their view that an independent adjudicator should be established. He cited passages from the report which set out that minority opinion. He is right that one member of the panel did not agree with the rest, and I recognise that not everyone thinks the adjudicator is necessary. However, five out of six of the members did consider that an independent adjudicator should be set up. They concluded that an adjudicator is essential for the effective monitoring and enforcement of the GSCOP. That is why the Government are committed to establishing an independent adjudicator.
The amendments in the name of the noble Viscount, Lord Eccles, would give the powers in this Bill to the Office of Fair Trading, not to an independent adjudicator. However, the Competition Commission recommended an independent adjudicator. There are clear advantages to establishing an independent, dedicated office with industry expertise, which can build working relationships with supplier trade associations and retailers, monitor compliance and promote best practice. The Office of Fair Trading has told us that it fully supports the argument that the GCA should be an independent body, separate from the OFT or any other organisation. Furthermore, on a practical point, it would not be appropriate to give these powers to the OFT while the broader competition regime is undergoing so much reform.
The Government believe that the best way to address the issues in the groceries market identified by the Competition Commission is to establish an independent groceries code adjudicator to enforce the groceries code, not to give more powers to the Office of Fair Trading. This is also the view of the BIS and EFRA Select Committees, of the Office of Fair Trading and of five out of the six panel members of the Competition Commission investigation.
I have listened to all the views that have been expressed and I thank in particular the noble Viscount, Lord Eccles, for taking the time and trouble to explain his differences so clearly. However, at this stage, I would ask him to withdraw his amendment.
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