Groceries Code Adjudicator Bill
Addendum to the Delegated Powers Memorandum by
the Department for Business, Innovation and Skills for
the Delegated Powers and Regulatory Reform
Committee
Introduction
1. This addendum to the Delegated Powers memorandum, previously
submitted to the Delegated Powers and Regulatory Reform Committee on
14 May 2012, deals with new or amended powers in the Groceries Code
Adjudicator Bill following amendments which have been tabled to the Bill.
2. The memorandum sets out:


The context and purpose of the powers;
Justification for the powers and the procedure proposed.
3. The Department for Business, Innovation and Skills has considered the
use of these additional powers in the Bill as set out below and is satisfied
that they are necessary and justified.
4. This Addendum refers to HL Bill 62, as first printed for the Commons.
Clause 9: Investigations: enforcement using financial penalties
Power conferred on:
Secretary of State
Power exercisable by:
Order
Parliamentary procedure:
Negative resolution
Context and Purpose
5. The Bill as introduced in the House of Lords allowed the Adjudicator to
impose financial penalties only if an order was made by the Secretary of
State authorising the Adjudicator to do so because the Secretary of State
thought that the Adjudicator’s other powers were inadequate.
6. In the Second Reading debate on the Bill in the House of Commons,
strong and consistent views were expressed on all sides of the House that
financial penalties should be available to the Adjudicator from the outset.
The Government therefore reconsidered the arguments and, having taken
account of the views expressed at Second Reading, introduced
amendments 1-9, 11, 14 and 16 at the House of Commons Committee
stage which would remove the need for an order authorising the
Adjudicator to impose financial penalties and allow the Adjudicator to
impose such penalties from the outset. However, the Adjudicator would
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not be permitted to impose a financial penalty in respect of a breach of the
Groceries Code occurring before an order is made under clause 9.
Justification
7. The Government remains of the view that it is important that the maximum
financial penalty, or the way it is to be determined, should be specified in
legislation and should not be decided solely by the Adjudicator. There are,
however, three reasons why this decision is left to delegated legislation
rather than being set out in the Bill.
8. First, in the Government’s view, it would not be appropriate for the
maximum to be set without carrying out a thorough consultation to obtain
the views of the large retailers, supplier representatives and others; and in
view of the timing of the Commons amendments, this would not have been
reasonably practicable during the passage of the Bill.
9. Second, providing for an order to be made by the Secretary of State
enables the Adjudicator, following appointment, to carry out the
consultation and then make a recommendation as to the maximum, which
must be taken into account by the Secretary of State before making the
first order under clause 9(7). This gives the Adjudicator a significant (whilst
not determining) role in setting the maximum, which would not be possible
if the maximum were set out in the Bill. As of course the Adjudicator will be
central to the enforcement of the Groceries Code, in the Government’s
view this sets the right balance in the making of the decision about the
maximum.
10. Third, delegation of the power to the Secretary of State allows flexibility for
the maximum level of a financial penalty, or how it is determined, to be
amended in future, without resorting to primary legislation. However, in the
Government’s view, amendment should not take place frequently or lightly.
Clause 9(10)(b) therefore provides that an amendment made under clause
9(7) can only be amended following a triennial review under clause 15.
Such a review will involve a formal consultation by the Secretary of State
of the Adjudicator, the large retailers, supplier representatives and others.
If such a consultation demonstrated that in the light of experience it was
necessary to increase, or indeed reasonable to reduce, the maximum,
then this could be done by amending or replacing the order made under
clause 9(7).
Parliamentary procedure
11. The committee observed in their first report that:
“As the Bill itself does not specify a maximum penalty (but leaves
this to be stated in the order) we consider the affirmative
procedure is appropriate, and this is what the Bill requires.”
12. At the time of reporting it was envisaged that the Adjudicator would only be
able to impose fines if an order was made by the Secretary of State
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authorising the Adjudicator to do so because the Secretary of State
thought that the Adjudicator’s other powers were inadequate
13. In the Department’s view the setting of the maximum penalty, or how it is
to be determined, is an important matter but clearly less important than the
decision to allow financial penalties to be imposed at all, which the
Commons amendments would remove from the Secretary of State and
address through the primary legislation.
14. Furthermore, we consider there are substantial safeguards against
inappropriate levels of penalty, namely:
a. Clause 9(10)(a) which would oblige the Secretary of State to have
regard to the Adjudicator’s recommendations before making an
order;
b. Clause 9(9) which would oblige the Adjudicator to consult
appropriate persons before making a recommendation; and
c. Clause 9(10)(b) which provides that an order can only be amended
after a triennial review under Clause 15.
15. We note that no amendments were tabled during Report Stage or
Committee Stage in the House of Commons to amend the parliamentary
procedure to affirmative.
16. The Department is therefore of the view that it is sufficient that an order
under clause 9(7) is subject to annulment as an instrument to which
section 5(1) of the Statutory Instruments Act 1946 applies (that is, by
resolution of either House of Parliament) (clause 23(3)).
Clause 12: Guidance
Power conferred on:
Adjudicator
Power exercisable by:
Guidance
Parliamentary procedure:
None
17. The Bill as introduced in the House of Lords required the Adjudicator to
publish guidance about how it will approach investigations.
18. In view of the amendment to Clause 9 described above the Government
introduced an amendment at the House of Commons Committee Stage
which would require the Adjudicator to publish guidance on the criteria that
the Adjudicator intends to adopt in deciding the amount of any financial
penalty.
19. As set out in the Memorandum for the Delegated Powers Committee
dated 10 May 2012 this power is mentioned for completeness but, in the
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Department’s view, the guidance will not be delegated legislation because
it will not be legally binding in any strict sense.
Clause 15: Restriction (following review by the Secretary of State) of
information that may be considered when deciding whether to
investigate
Power conferred on:
Secretary of State
Power exercisable by:
Order
Parliamentary procedure:
Affirmative
Context and purpose
20. The Bill as introduced in the House of Lords enabled the Secretary of
State to restrict the information that the Adjudicator can consider when
deciding whether to commence an investigation under Clause 4.
21. Amendments 10, 12 and 13 were made by the House of Commons at
Report Stage which would provide that this power is only exercisable if, as
a result of the findings of a review under clause 15(10A) of the Bill (clause
15(10) before taking account of the Commons Amendments), the
Secretary of State thought that this would enable the Adjudicator to be
more effective.
Parliamentary procedure
22. An order may not be made under clause 15(10A) unless a draft of the
instrument has been laid before and approved by a resolution of each
House of Parliament (clause 23(2)). Although any order or revocation
would follow a statutory consultation under clause 15 and although the
fundamentals of the Adjudicator’s investigation powers and enforcement
powers would not be affected, the Government has taken into account
views expressed in the Commons that constraint of the information
capable of being considered by the Adjudicator should be regarded as a
very significant step. The affirmative procedure will better enable
Parliament to test the Secretary of State’s reasoning for exercising the
power. It is also relevant in this context that the power in clause 15(10A)
is a Henry VIII power.
Department for Business, Innovation and Skills
1 March 2013
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