On 25th June 2013, an Act creating the Groceries Code Adjudicator came into force. The Adjudicator is charged with encouraging, monitoring and enforcing compliance with the Groceries Supply Code of Practice by the UK’s largest supermarkets (some 10 supermarkets with UK groceries turnover of more than £1 billion). The Groceries Supply Code of Practice was introduced in 2010 following a Competition Commission investigation.

The Code requires large retailers to deal fairly and lawfully with their suppliers, including among other things:

  • Not to vary supply agreements unilaterally
  • Not to charge listing fees except in limited circumstances
  • Not to charge position payments except for promotions
  • Not to require suppliers predominantly to fund promotions
  • Not to over-order at promotion prices
  • Not to seek contributions to marketing costs unless provided for in supply agreements
  • To de-list suppliers only for genuine commercial reasons and to give reasonable notice and opportunity to discuss

The need for the Adjudicator arose from the inability of the industry to agree on a means of selfregulation, as well as a perception that suppliers were often reluctant to come forward with complaints for a variety of reasons, including the risk that a challenge could result in adverse action against the complainant. The Adjudicator has a legal duty to protect supplier confidentiality.

The Adjudicator’s statutory functions are to provide advice both to suppliers and retailers, arbitrate disputes, investigate complaints, impose sanctions and other remedies for breaches of the Code and to publish an annual report.

The Act provides for tough powers and a range of enforcement actions available to the Adjudicator to ensure suppliers are treated fairly. However, before the Adjudicator may launch a formal investigation and take enforcement action, she must publish guidance on the criteria she intends to adopt in deciding whether to carry out investigations, the practices and procedures for such investigations, the criteria for choosing among enforcement powers and the criteria for deciding the amount of any financial penalties.

To that end, the Adjudicator on 31 July 2013 launched a consultation seeking feedback on the proposed guidance:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226054/31_July_2013_ -_GCA_Statutory_Guidance_for_consultation.pdf

The proposed guidance sets out four criteria for initiating a formal investigation: impact, strategic importance, risks and benefits and resources. Once a formal investigation is opened, the guidance sets out proposed procedures for obtaining documents and information, including imposing time limits. If an investigation results in a finding of a breach of the Code, the guidance proposes that the Adjudicator may make recommendations, require information to be published and/or impose financial penalties. The proposed guidance sets out the criteria for the deciding which enforcement power to use, considering sanctions that are proportionate to the nature and seriousness of the breach. The Adjudicator proposes a maximum financial penalty of 1% of UK turnover.

Responses to the consultation are due by 22 October 2013 and the final guidance must be published by 25th December 2013.