The Government has confirmed that the body that is to be set up to enforce the Groceries Supply Code of Practice (GSCOP) will not have the power to impose fines on grocery retailers.

The confirmation is set out in the Government’s response to the Business, Innovation and Skills Commons Select Committee Report on its pre-legislative scrutiny of the draft Groceries Code Adjudicator Bill which was published in May 2011.  Our previous Law-Now can be found here.

The Select Committee had recommended that the draft Bill be amended to include fines as a sanction available to the Adjudicator, a recommendation originally made by the Competition Commission following its inquiry into the grocery sector in 2008.  Although the Government considers the arguments are finely balanced, and whilst it reserves the power to introduce fines at a later date, it considers that the appointment of the Adjudicator, the risk of an investigation and the publication of the details of an investigation should provide a sufficient deterrent for compliance with GSCOP by grocery retailers. Thus, it wishes to allow time for the Adjudicator and the regime as a whole, to prove their effectiveness before introducing the additional sanction of fines.

Other recommendations not accepted by the Government

The other principal recommendation of the Select Committee which will not be taken forward for the time being is the power for the Secretary of State to widen categories of informant whose evidence could be used to trigger an investigation. These could include a trade association, or whistleblowers in the form of employees or ex-employees of retailers.  The Government regards that it is appropriate that only direct or indirect suppliers are able to submit a complaint which will relate principally to contractual matters between the parties. 

However, the Government will consider the issue further and it is clear that the Government recognises that trade associations have a role to play in the effectiveness of the new regime.  The Government notes that any publicly available reports of trade associations may be considered by the Adjudicator when deciding whether or not to carry out an investigation.  This would provide a means by which trade associations may help the Adjudicator become aware of systematic patterns of behaviour or breaches of the GSCOP.  The Government also indicates that it will actively work with trade associations between now and the introduction of the Bill to identify ways in which they can help to ensure the Adjudicator is as effective as possible.

The Select Committee had also raised a concern whether a right of judicial review is the appropriate remedy against a wrong decision of the Adjudicator leading to a large retailer being named and shamed. The Select Committee had asked the Government to consider the introduction of an alternative speedy and effective appeal mechanism.  This was rejected by the Government, which considered that providing retailers with a full right of appeal, potentially requiring a repetition of a detailed fact finding exercise, could result in a serious delay in the publication of an investigation, potentially reducing its impact.

Changes which will be made to the draft Bill

The Government has, however, agreed with some recommendations made by the Select Committee. The Government agrees with the recommendation that the Adjudicator should have some power to escalate remedies for non-compliance in the event of continuing breaches. This will be achieved by ensuring the Adjudicator imposes a recommendation setting out the behaviour that is expected of the retailer following the first investigation, which if breached will be sufficient to trigger a second investigation.

The Government also agrees with the recommendation that a first review of the operation and effectiveness of the Adjudicator takes place after two years, as opposed to the current proposal of three years.

Timing of the Bill

The Select Committee in its report had expressed concern at the time it has taken for the Adjudicator to be introduced.  To that end, it expedited its pre-legislative scrutiny, reducing the usual duration of twelve weeks to eight weeks, and encouraged the Government to proceed with the legislation speedily.  However, the Government gave no clear indication on future timing of the Bill, other than to say that the legislation will be introduced as soon as Parliamentary time allows.