Following increased lobbying from stakeholders in the supply chain and MPs, the Government has given the Groceries Code Adjudicator (GCA) the power to fine supermarkets who fail to comply with the Groceries Supply Code of Practice (Code).

In our last alert on the GCA, we highlighted that the power to impose financial penalties on supermarkets for abusive market practices was reserved for the Secretary of State. However, on 4 December 2012, the Government performed a U-turn by giving the GCA an immediate power to fine supermarkets for serious breaches of the Code. This adds to its existing power to 'name and shame'. The decision will no doubt be welcomed by suppliers and their trade bodies, while supermarkets are expected to re-iterate that the imposition of the GCA will cause price rises for consumers.

The Government's announcement comes immediately prior to the GCA Bill reaching the Public Committee Stage in the House of Commons. This is the stage where a Bill is subject to the most detailed examination and debate in its journey towards becoming law. The timing of this announcement will no doubt smooth the passage of the Bill through the Public Committee Stage, avoiding continued debate over whether the GCA should have the power to impose fines.

The GCA will publish guidance within six months of the GCA Bill coming into force of the maximum amount it proposes the GCA should be able to fine. The Secretary of State will then take this guidance into consideration when establishing an Order to determine the maximum level of fine. Supermarkets will also have a full right of appeal against any fine imposed.

In addition, the European Commission is monitoring the progress of the GCA Bill as it is considering the creation of a regulatory system across the European Union to prevent supermarket dominance over suppliers. While the Cabinet of the European Commissioner for Agriculture and Rural Affairs would prefer a self-regulatory system, such cross-party voluntary agreement from supermarkets and suppliers alike appears remote. Legislation would therefore need to be considered.

This would be an interesting development in the food and drink sector across Europe. However, it is currently unclear how such a system would sit with the imminent imposition of the GCA under UK law.

Proceedings in the Public Bill Committee are expected to conclude on 18 December 2012. We will of course further monitor the progress of the GCA Bill through Parliament and keep you up-to-date with any further significant issues that emerge.