Supermarket body barred from giving fines

The independent body set up to resolve disputes involving major supermarkets will be barred both from fining those it discovers breaching industry regulations and from investigating whistleblowers’ claims, the government has said.

The plans, announced on Saturday, go against recommendations made by MPs and have been attacked by trades unions and politicians alike, who said they will lead the Groceries Code Adjudicator to be “neutered from the start”.

Mary Creagh, the Shadow Environment Secretary, said: “This government is out of touch with farmers, food processors and consumers alike, when food prices have risen 6 per cent in one year. They should be standing up for shoppers who are feeling the squeeze and the food producers who are the engine for jobs and growth in this, the country’s largest manufacturing sector.”

Two cross-party parliamentary select committees – as well as the Competition Commission – called for an amendment to the Government’s Groceries Code Adjudicator Bill, giving the body more powers. But in its response, the Department for Business, Innovation and Skills said that “financial penalties should be kept as a reserve power”.

The Government said it thought that simply setting up the body would “give the Groceries Code fresh impetus” and that large retailers will want to avoid being investigated, regardless of whether there is the possibility of a fine, not least because of the negative publicity that would attract.

But it also said that “if there is evidence of significant non-compliance with the Groceries Code and the existing regime seems not to be sufficiently effective, there is the prospect of a swift introduction of financial penalties”.

In the document, the Government said that reports from whistleblowers would not be allowed to trigger an investigation because “it is likely that only a direct or indirect supplier would have sufficient information to make an appropriate complaint” against a supermarket.

It added that, while third parties, trade associations and non-governmental organisations will “still have a useful role to play in offering advice and assistance to their stakeholders”, complaints must come direct from the suppliers.

The Government announced plans to set the Adjudicator up in August last year, saying it would be responsible for resolving disputes between supermarkets and their suppliers – often farmers – under its draft Groceries Code Adjudicator Bill. The body will be funded by the supermarkets and will sit within the Office of Fair Trading (OFT), but will be independent when it launches in early 2014, the Government said.

The National Farmers Union (NFU) called the decision a “kick in the teeth” and “inexplicable”. NFU President Peter Kendall said: “The Government chose to publish a draft Bill for pre-legislative scrutiny, so that MPs would be able to give their considered judgement on what form the final Bill should take.

“Having done so, it has now chosen to ignore the most significant recommendations of those MPs, rendering the pre-legislative process an irrelevant diversion.”

A BIS spokesman said: “The Government thanks the BIS Committee for its thorough scrutiny of the draft Groceries Code Adjudicator Bill. Pre-legislative scrutiny plays a very important role in the preparing legislation and informing Parliamentary debate, and ultimate leads to better legislation.”