Groceries Code Adjudicator conference 2018

Speech at the Groceries Code Adjudicator annual conference by Andrew Griffiths, Minister for Small Business, Consumers and Corporate Responsibility.

Andrew Griffiths  MP

Five years ago, the role of Groceries Code Adjudicator (GCA) was announced, with a clear purpose: to ensure large supermarkets treat their direct suppliers lawfully and fairly.

That role was created after a Competition Commission Market Investigation into the groceries sector, which found that while the sector was broadly competitive, some larger retailers were transferring excessive risk and unexpected costs to their direct suppliers.

It was a situation which benefited nobody. Small businesses were dealing with big burdens; some found themselves discouraged and stopped investing in quality and innovation. This, in turn, had the potential to harm the market and, ultimately, customers.

We needed the right person to fix this. And, as it turned out that person was Christine Tacon.

I’d like to thank Christine for inviting me here today, giving me the honour of speaking to you all in the wonderful surroundings of Church House.

As the Groceries Code Adjudicator, Christine’s role includes investigating complaints and arbitrating in disputes of alleged breaches of the Groceries Code. Which might not sound like a sure-fire route to popularity.

But the first Statutory Review of the GCA found that all around the world, Christine is regarded as an exemplary modern regulator.

That’s because she’s helping to forge a new relationship between supermarkets and their suppliers; one that’s as good as it can possibly be, to the benefit of all.

For this, and for all they’ve achieved so far, I would like to congratulate Christine and her team.

One of the cornerstones of this success has been Christine’s collaborative approach; keeping everyone in the picture, listening at all times and acting when necessary.

This is an efficient and effective way to deal with any existing practice that’s inconsistent with the Code, and an equally good way to put it right for the future.

This collaborative approach works to the benefit of retailers and suppliers alike, because it achieves change quickly, without adding excessive burdens or GCA interference into the mix.

So things are going well. But the Code will only continue to work if suppliers are aware of the rights and entitlements that it provides and are confident in exercising them.

Following the first Statutory Review of the GCA, Christine launched the ‘Code Confident’ campaign. Its aim is to engage suppliers with the Code, encouraging them to get trained and speak up to Code Compliance Officers and the GCA.

Alongside this, Christine arranges private sessions for suppliers to meet with her to discuss any Code related issues and will treat the information she receives in confidence.

This kind of support can really help you understand how to use the Code in your commercial negotiations with retailers, so I’d urge you to explore these opportunities.

That goes for retailers too. In supporting the GCA’s work, you’ll be building strong, lasting relationships with your suppliers. And that’s something to really celebrate.

As I have highlighted, the GCA has achieved some extremely beneficial outcomes for all those involved in the supply chain. But that doesn’t cover the whole sector.

Last year’s call for evidence was a response to concerns about unfair trading practices raised by other suppliers in the groceries sector who are not covered by the Code.

Concerns were expressed around issues like the balance of bargaining power in the groceries supply chain, unfair or unclear contract terms, late payments, and a lack of trust across the sector.

In February we responded with targeted and proportionate measures.

This included establishing a one-off ‘collaboration fund’ of up to £10 million, launching later this year, to help with the costs of establishing joint ventures, including cooperatives or formal producer organisations.

We’ve instigated a review, led by the Competition and Markets Authority, to look at bringing more grocery retailers under the remit of the GCA.

We’re introducing compulsory written contracts between farmers and dairy companies, including a requirement on dairy processors to specify a fixed price or clearly set out how prices would be calculated.

And in addition to these proposed measures, the government is taking action to tackle the late payment culture across all sectors, not least through the appointment of the Small Business Commissioner.

As an ally for small businesses, the Commissioner is creating a culture change in payment practices which will empower those businesses to act on late payment, which can be a real issue for SMEs.

On average, late payments can cost a small business £4,000 a year. Across all SMEs that’s £2.6 billion being spent on chasing payments. So every pound that we get back into the hands of an SME delivers direct benefits to the UK economy.

Further to this, we’ve introduced a requirement for the UK’s largest businesses to report on their payment practices, policies and performance twice a year; providing transparency in their payment behaviour and making it a reputational, boardroom issue.

This isn’t just about growth and the economy; it’s about doing what is right by our small businesses.

That is why the Chancellor recently announced a call for evidence to explore the impact of unfair payment practices on small businesses, so that we can to eliminate the scourge of late payments once and for all.

I really want us to get this right, so I hope as many of you as possible will offer up your insights. With views from all sectors, we can ensure that the UK is truly the best place in the world to do business.

Five years on, the GCA is going strong. Christine and her team have become an essential, positive force for the sector, and I’m sure this will be true five years from now too.

We should also applaud the good progress the groceries sector has made. It has largely picked up and changed culture.

There is evidence from the GCA’s 2018 annual survey that every retailer covered by the Groceries Code showed a net improvement in their compliance with the Code.

There is of course still more to do. As the sector adapts to changes, like the growth in online shopping, we must make sure business practices remain fair.

That means everyone should be represented, and as the Small Business Minister I will ensure that the voices and concerns of small businesses are never drowned out by those of bigger businesses.

The government’s Industrial Strategy recognises the role that regulation can have in helping smaller businesses assert themselves.

And in order to remain on the front foot with our regulatory environments, as part of the Consumer green paper we are reviewing the competition rules to ensure they enable quick, fair and effective enforcement, and create markets that work well for everyone.

But, success is not just built on government interventions, but on communication and cooperation in recognition of mutual interest.

If you continue to work together – discussing your issues and developing mutually beneficial trading relationships – you will be improving the sector for yourselves and your customers alike.

And you can be safe in the knowledge that the GCA will be there to make sure that everyone knows and follows the rules.

So I offer my congratulations, once again, to Christine and everyone else at the GCA for all their work to date, and my thanks to all of you for listening. I look forward to your questions.

Thank you.

Published 25 June 2018