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Groceries Code Adjudicator’s Guidance on Investigations and Enforcement Functions

Groceries on the shelf in a supermarket Print publication

24/12/2013

Background

The Groceries Code Adjudicator Act 2013 (the Act) came into force on 25 June 2013. The Act established the Groceries Code Adjudicator (the Adjudicator) to enforce the Grocery Supply Code of Practice (the Code). The Code was designed to remedy certain adverse effects on competition identified by the Competition Commission relating to the supply of groceries in the UK.

The Code currently applies to all retailers with a turnover of more than £1 billion in groceries in the UK and imposes certain obligations on these large retailers in relation to their dealings with suppliers.

The Adjudicator published consultation draft guidance on the Adjudicator’s investigation and enforcement functions on 31 July 2013 and final statutory guidance was published on 18 December 2013 (the Guidance).

The Guidance explains in detail how the Adjudicator will conduct investigations and decide on enforcement actions and the penalties to impose.

Investigations

Prior to the Guidance, the Adjudicator was only able to collect information relating to breaches of the Code. The Adjudicator may now launch investigations into breaches of the Code which have occurred since the Act came into force.

Criteria for initiating an investigation

The Adjudicator may carry out an investigation if the Adjudicator has reasonable grounds to suspect that a large retailer has contravened the Code or failed to follow a recommendation made, following a previous investigation. The reasonable grounds for suspicion might be based on evidence supplied by direct or indirect suppliers, third parties (such as trade associations), other retailers, whistle-blowers or information which is in the public domain.

When deciding whether to investigate, the Adjudicator will assess the impact on suppliers of the practice complained of (and indirectly the impact on customers); the strategic importance of a proposed investigation and whether it would further the Adjudicator’s statutory purpose; the risks and benefits of conducting an investigation and if it would be a proportionate use of resources.

Investigation procedure

Once a formal investigation is opened, the Adjudicator has statutory powers to require a person to provide information and an offence will be committed if they intentionally fail to provide documents. The Adjudicator must however keep information confidential. A person is not required to provide a document if they can prove that the document was not in their possession or control; they had a reasonable excuse; or if the Adjudicator has failed to act in accordance with the Act.

The Adjudicator is not legally required to complete investigations within a specific period but will try to complete investigations as soon as reasonably practicable and is likely to do so in less than 12 months.

The Adjudicator may require some or all of the costs of the investigation to be paid by a large retailer if it believes that it has acted in contravention of the Code. If a complaint is found to be vexatious or wholly without merit, then the complainant may also be required to pay some or all of the costs of an investigation.

Publication of outcome of investigation

The Adjudicator must publish the outcome of the investigation. The investigation report will contain any findings the Adjudicator has made and details of any action taken or proposed with reasons.

Enforcement

When deciding the appropriate sanctions, the Adjudicator must have regard to the six penalties principles and should also consider the list of relevant considerations in the Guidance.

The possible enforcement measures are:

  • Recommendations – the Adjudicator will monitor this to make sure it has been followed and although there is no express sanction for failing to comply with a recommendation, the Adjudicator could open a new investigation.
  • Require information to be published – the Adjudicator could require publication by various means. If the large retailer fails to publish the information the Adjudicator could bring civil proceedings to obtain an injunction/order or any other appropriate remedy or relief.
  • Financial penalties – the Adjudicator may consider whether the infringement was committed negligently or intentionally. A large retailer may appeal against the imposition of a financial penalty or the amount to the High Court. The Adjudicator will not be able to impose financial penalties until the Secretary of State makes an order to empower the Adjudicator and to set the levels of fines. It is expected that this will be done by April 2014.

Comment

Although the Adjudicator was established on 25 June 2013 and could collect information and evidence from that date, the Adjudicator could not launch an investigation until the Guidance was published.

Therefore, the Adjudicator can now launch investigations into alleged breaches of the Code which occurred after 25 June 2013, but will not be able to impose financial penalties until the penalties order comes into effect.

To view the Guidance in full please follow this link

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