Unfair Trading Practices: Discussion

I welcome members and witnesses. Before we begin, I remind members and witnesses to make sure their mobile phones are turned off. Apologies have been received from Senator Michelle Mulherin.

We are meeting today to discuss unfair trading practices. I welcome Ms Christine Tacon, the UK Groceries Code Adjudicator, and thank her for coming before the committee today to update us on her role in respect of compliance and enforcement of the grocery supply code of practice and unfair trading practices pursuant to her engagement with retailers. I am delighted to have her here today. We have been following her progress since her appointment five years ago. Some members might have met Ms Tacon in the hotel this morning. Some of us met her three or four years ago when she made a presentation. I would also like to welcome Ms Faye Williams, head of operations at the UK Groceries Code Adjudicator.

Before we begin, I draw attention to the fact that witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of that evidence. They are directed that only evidence connected to the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him or her identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside of these Houses or an official either by name or in such a way as to make him or her identifiable.

I invite Ms Tacon to make her opening statement.

Ms Christine Tacon

I thank the Chairman for inviting me to attend this committee hearing. I welcome the opportunity to update the members on my work in the UK.

My role as Groceries Code Adjudicator, GCA, is to monitor, ensure compliance with and enforce the UK groceries supply code of practice. The code exists to ensure that the UK’s 13 regulated retailers treat their direct suppliers lawfully and fairly across a range of supply chain practices. Direct suppliers are covered whether they are based in or outside the UK.

I have been in the post for six years. From the beginning, I have adopted a modern regulatory approach, working collaboratively with the retailers to respond to issues raised by suppliers and others and bring about beneficial change in the sector. I have greatly enjoyed the role and am proud of the significant changes in the sector that have been achieved in that time.

I have statutory powers to investigate suspected breaches of the code and to arbitrate in disputes between suppliers and retailers, but my primary objective is to strengthen the supply chain and make a difference that suppliers notice. Accordingly, I measure progress through improvements in the sector rather than the number of investigations carried out. I do this by listening to what suppliers tell me and carrying out an annual survey asking suppliers for their view on how well retailers are complying with the code. The survey is now one of the most important activities that I do each year.

In 2019, a record 1,417 direct suppliers completed my survey, providing valuable information about retailer compliance with the code which showed continuing improvement in retailer behaviour. When I did the first survey in 2014, eight out of ten suppliers said they had experienced a breach of the code in the past 12 months. It is now down to only four out of ten.

Across every paragraph of the code the incidence of reported issues has fallen year-on-year. When I took on the role of GCA, the biggest issue was forensic auditing, with 45% of suppliers reporting concern in my 2014 survey. This year, only 7% of suppliers reported forensic auditing as an issue of concern. Forecasting is now the issue most reported by suppliers and this, too, has declined to 15% from 33% in 2014.

Every year, I ask suppliers to score the retailers they supply based on their perceptions of those retailers’ overall compliance. In the first year, the worst score was 58% compliant and the best was 90%. Now, only two of the retailers captured in the survey are below 90% and the highest score is 97%. This squeezing of performance into significantly higher levels of compliance is testament to the effectiveness and impact of my collaborative approach. It is also a mark of the positive work and engagement by the retailers.

I have established a good working relationship with every one of the retailers and much of the progress made can be attributed to the work of their retailer code compliance officers, CCOs, acting as my ears and eyes within their business. I have regular meetings with the retailer CCOs to discuss progress and I meet the chief executives and the audit chairs on an annual basis.

From March 2018 to March 2019, my main focus was on the investigation into Co-operative Group Limited, Co-op. This was the second investigation that I have carried out in six years. The first was into Tesco plc and that was concluded in 2016. In each investigation I found evidence that the relevant retailer had breached the code and I made recommendations to them.

The investigation report into the Co-op identified the root causes of the breaches and made robust recommendations for urgent action. This was an important investigation because it firmly established the role of governance and corporate culture in ensuring code compliance.

I am monitoring closely how the Co-op implements the recommendations I have made and am working with all the regulated retailers to ensure they, too, are taking a whole-organisation approach to compliance risk management. This should be embedded into retailers’ overall governance structures, their legal and audit functions as well as their internal systems and processes, and into their training and communication with suppliers. That is the best way to make sure that breaches of the code do not happen and if they do, that they are quickly picked up by the retailers and put right.

One of the main challenges of the role has been encouraging suppliers to speak to me. Awareness of the code is generally high among suppliers at more than 90%, but I have put a lot of effort into encouraging suppliers to get trained on the code and to tell me when they are experiencing issues with retailers.

I have always reinforced to suppliers my statutory duty of confidentiality as well as encouraging suppliers to be trained in the code. In 2017, I launched a code confident campaign which encouraged suppliers to Know the Code, Get Trained and Speak Up to me and to the regulated retailers code compliance officers. This message has reached thousands of suppliers and is supported by retailers and trade associations.

One of the best ways of raising awareness of the Groceries Code Adjudicator has been attending events at which grocery suppliers are present, and I have made a commitment to attend at least one event a month. This enables my Code Confident message to get direct to suppliers and provides an opportunity for suppliers to share their experiences of dealing with the retailers. I also publish a regulator newsletter, the link to which is on the screen.

I now hear from suppliers more frequently even though the survey tells me that they are experiencing fewer code-related issues. I am pleased the number of suppliers trained in the code has increased, with approximately 50% of suppliers responding in the survey.

The first statutory review concluded in 2017 that the Groceries Code Adjudicator was "an exemplary modern regulator with an international reputation" and many other countries look to the UK as a leader in this area.

My term as Groceries Code Adjudicator ends in June 2020. In my final year, I am committed to working with each of the 13 retailers to ensure that all their practices, systems and behaviours are designed and structured to meet their obligations under the code. However each of them is set up, I want to see the retailers build for themselves a whole-organisation approach to code compliance. It means retailers doing the right thing, not only because that is what is required of them but because it makes good business sense.

I thank Ms Tacon for her opening statement. I will now take questions from members. Deputy McConalogue will start and he will be followed by Deputies Stanley and Cahill in that order.

I welcome Ms Tacon. I thank her for taking the time to present to the committee and giving us the benefit of her experience derived from her role in the UK. I attended the presentation made by Ms Tacon about 18 months or two years ago to the conference of the Irish Farmers Association, IFA, as did other committee members. There has been change since then at European Union level concerning the unfair trading practices directive. I am interested in hearing Ms Tacon's perspective, in the context of her post as the UK's Groceries Code Adjudicator, on the strength of the directive that is proposed will be introduced across the EU. It is driven by the European Commission. Is the UK code stronger than the EU regulations or are the latter stronger in some areas? What are the key differences and similarities? On the implementation of the UK code and Ms Tacon's experience, are there any key lessons we might learn?

Our Competition and Consumer Protection Commission, CCPC, has a role in adjudicating between suppliers. When the committee met representatives of the CCPC, members argued that the CCPC's role of enhancing competition from a consumer perspective sometimes conflicts with its role in adjudicating on fairness in the supply chain. I would like to hear about the role and experience of the UK Groceries Adjudication Office in this regard compared with that of the CCPC here. Is there any crossover between the roles of the two bodies?

We have had a significant issue here, and I know this is also an issue in the UK, regarding the role of primary producers and trying to ensure fairness for them. That is particularly the case in the beef sector where there is a need for fairness in the relationship between farmers, as primary producers, and processors. Beyond the processors then are the retailers. That is not the particular space in which Ms Tacon and her organisation work, but I would be interested in her perspective concerning a role for an adjudicator in ensuring that there is fairness and transparency in the relationship between primary producers and processors, as well as onwards to retailers. Are there any lessons we might learn in that regard? I know there are similar issues with the beef sector in the UK where farmers do not believe there is transparency as regards the share of the beef price they receive compared with the share taken by other parties in the supply chain. Has that been considered by Ms Tacon's office or has it been considered at government level in the UK? Have representatives of farmers' organisations in the UK been active on this issue? Could an office such as Ms Tacon's fulfil such a role in this area by expanding its remit?

Unfortunately, a vote has been called in the Dáil and we will have to suspend briefly. We all know we are duty-bound to vote in the current climate.

Sitting suspended at 3.24 p.m. and resumed at 3.45 p.m.

I ask Ms Tacon to now answer Deputy McConalogue's questions.

Ms Christine Tacon

The Deputy's first question was about the EU unfair trading practices directive. I am happy to share what I consider the crucial differences between the EU plans and the approach we have adopted in the UK. The UK code came through two Competition Commission investigations which were looking for consumer harm. It very much aims to protect the consumer, whereas the EU directive has come from the perspective of protecting the farmer. The key difference is that in the EU directive one must prove some sort of market imbalance between the first person and the people to whom that person sells and subsequent buyers. There is also a cap involved whereby any company earning over €350 million is not covered. I have found it very useful that everybody is covered by the UK code, as one does not have to question whether or not it has been triggered. I have also learned quite a lot from the large suppliers and multinational businesses which are very quick to pick up that a request that they have had could be in breach of the code. They are well trained. They are supported by good lawyers and they raise things with me which I am sometimes able to stop. I hear first from very large suppliers, and I feel that having such large suppliers covered has been an advantage. The second difference is that the EU code applies to the whole supply chain, from the retailer right through to the producer. The Competition Commission only every investigated the relationship between retailers and their direct suppliers, which means that from the beginning I only had ten retailers to work with. It is now 13, but I have been able to work with them very closely. If I suddenly had to look after the whole supply chain, I could not work like that or get into anything like the same level of detail.

The Deputy also asked about lessons learned from implementing the code. I alluded to this in my opening statement but I cannot reinforce enough how difficult it is to get suppliers to tell me what is going on. One really has to work at it. I speak at numerous trade events and I always arrange time for people to have private one-to-one conversations with me. If a supplier asks me to visit, I always agree to do so and I think I have visited ten of them in the past six years. Suppliers do not invite me very often. The survey has been hugely important, not only for getting feedback from suppliers but also because retailers can see its validity. They do not dispute the outcome and therefore work on those things. The first lesson was on the difficulty in getting information and proving to people that I had a duty of confidentiality and could be trusted. That has been really hard. Second, I learned that the code compliance officers who work for the retailers are my allies. They are trying to make sure that the retailers do not break the code. They are not allowed to be in the buying chain of command and so they tend to be from the audit, legal or finance departments of their companies. They are trying to protect their businesses from being investigated and fined. They generally do not know what is going on, so if I hear about something I first explain it to them. I then leave them to go back into their businesses, do some research and come back and tell me what they have done about it. These code compliance officers have been hugely important in driving the changes within the retailers.

I also have a very good lawyer who slowed me down and told me I could not sort everything out at once. She told me that, rather than finding a problem with everything, I should focus.

I only tended to work on five issues at a time so that they had time to respond and do it properly, and then I would formerly discharge an issue and bring a new one forward.

My office is funded by a levy on the retailers, and under the Act I have the ability to vary the levy. If a retailer is brought in arbitration to me, I have had a case study against them or I have had to investigate them, I charge them a higher percentage of the levy. If I am looking at issues like consumer complaints, if a retailer does not charge for consumer complaints, then they get charged less. I had a mechanism, which I agreed with them, of using the levy in terms of how much they pay towards my office as an incentive as well.

Sorry to cut across you but is there a base from which you start off, from which you add or subtract, depending on the level of compliance?

Ms Christine Tacon

Yes. I take 60% of the levy. When I first started, it was 10% each. Now I am at 60% of the levy which they share between them. Some 20% of the levy is based on how big they are and how many of the issues I am working on they engage in. The top approximately 20% of the levy can vary, according to how good they have been. If they have been causing me problems, they cop a bigger share of the levy. It is just another incentive of getting them to comply.

The next question was about the competition authorities. The competition commission, now the Competition and Markets Authority, CMA, are behind everything I do. They created the order. The order still sits there so that they have to designate the retailers, or who I have to regulate. In the order, it says that all supply agreements have to be in writing. Annual compliance reports have to be sent to the competition authorities and copied to me - I will come back to that - and now they have to do an annual review to see whether any further retailers should be designated. The competition authorities wrote the code, so my role is just to oversee the code with the retailers that they designate.

There is something in the order that says that I can make recommendations to the Competition and Markets Authority if I think the code is insufficient in some way. Right at the beginning, they said to me that I should really try to resolve anything I found within the code, as it was written, because they feared that they might have to do another market investigation if I wanted to change the code. I have used the code, as I got it, which I have to say is a bit wooly, and if I find anything, I find ways of working with the retailers.

I have spoken to people in many other countries, and the thing that they have always tended to fall over on is trying to bring in some regulation on fair trading practices and address fairness of pricing. If one tries to address pricing at the same time, one tends to really struggle to get there, because one has this big push against it. Are we doing this to protect consumers or under the European Union directive are we doing it to protect farmers? That has been the beauty of the United Kingdom one, that price was very clearly taken out of it, which enabled me to focus on the practices of paying people on time and not over-charging for consumer complaints and all these other things that I have had to look at. That is in many cases focused on areas where retailers can become more efficient and can have a better way of doing business. I know the retailers say they have gotten rid of whole departments that used to work on these things since I raised it. They have decided it is just not worth doing anymore. Arguably, there are great areas of efficiency that can come from that.

I do not meet regularly with the Competition and Markets Authority, but I am based in their building and I do feel that they lend a degree of authority to my role. I feel that there is quite a strong connection between us.

The final question I was asked was about the role of the primary producers and the processors. Ever since I started, there has been campaigning in the United Kingdom for my remit to be extended and for the remit to be taken back to the farmgate and to include processors. After my first three-year term, when they did their statutory review, alongside that, they made a call for evidence on whether the remit should be extended. Following many submissions - clearly very many from the farming community - they decided that there was not a sufficient case for the remit to be extended, but they included at that point that the CMA should review every year whether any other retailers had gone over the £1 billion turnover threshold, which was what they set in 2010 for retailers that were covered by the code, and whether that should be extended.

The origin of the code in the United Kingdom is about protecting consumers and not protecting the primary producers. The role that I have does not tackle the issue between producers and their processors.

Thank you very much.

Can I just ask a follow-up question? Obviously we know about the Brexit backdrop, etc., but in relation to the European Union unfair trading practices proposals, where does that stand with regard to the United Kingdom? Has consideration been given to transposing them into United Kingdom law? If so, would that require a separate office from Ms Tacon's, or would it be envisaged that that might be through her office in terms of amending its remit?

Ms Christine Tacon

I should make it clear - I might make it sound very simplistic - that my role is just as a regulator. I literally have the code and I have the designated retailers. The areas Deputy McConalogue is talking about are much more to do with policy. Although my position is sponsored by the Department for Business, Energy and Industrial Strategy, BEIS, I act totally independently from it. I do not know what BEIS is working on. Nobody has asked me about this area, and I feel fairly confident in saying that I do not think anybody is expecting that the European Union directive is going to be transposed to the United Kingdom. It has certainly not been mentioned to me, but it would not be my area of work.

Thank you. I call Deputy Stanley.

I welcome Ms Tacon and Ms Williams and thank them for their presentation. Ms Tacon's main role is to protect the end customer or shopper and she spoke about a proposal to extend her role. We are just coming out of a situation where beef farmers were looking for protection. It is an ongoing problem in other European countries as well, where farmers feel the price they get for their produce is only a fraction of the end price. There is a situation also where some of the large multiples are selling vegetables below-cost. That is creating a problem at the farmgate in terms of the viability of their businesses. Should there be a separate set of regulations and a separate office to look after the primary producer, or should it be a continuous chain right through from the field to the counter in the shop? Is that the most efficient way of dealing with this?

There is a dispute here in respect of the price the primary producer of beef gets from the processors. The processors will claim that the price they get from the retailer is below what they should be getting. It is very much an undisclosed figure and it is very hard to get a figure. When the customer goes into the butcher shop, to the vegetable counter or whatever, he or she does not see that much difference in prices. Sometimes the big multiples will offer a discount to try to squeeze out somebody else or to put pressure on their suppliers.

There is a connection between the different layers. Do we need an adjudicator or a regulator to operate across the full chain?

Ms Christine Tacon

I suppose Deputy Stanley is asking me for an opinion, because it is not something that I do. In my role, I do not engage in price at all. I have been fairly strong in the United Kingdom because many people felt when the role was created, that it was not going to make any difference.

I hear so many suppliers say to me that they did not think I would make a difference but I have. They thank me for doing so. Just as with the EU unfair trading practices regulations, I was able to make a difference because of ten years of lobbying, working teasing it out, and creating something that really could make a difference. I was able to work intensely with those ten retailers. Things would have been different if I had been given the whole supply chain in one go, as the Deputy proposes. That would involve doing the job at a completely different level. I felt that because what I was working on was making a difference, there was a danger of being given a huge amount of further concerns to work on. This might have caused the system to fail on the bit where it has already succeeded. All along I have been quite wary of people who propose to give me a lot more to do because my job works, or propose to expand my remit to the 8,000 suppliers to the retailers and the 100,000 people who supply them. If that happened, the job would have to be done very differently.

All I can really say is that because there has been such pressure from primary producers in the UK to provide some protection, it is foreseen that something to that effect will be included in the agriculture Bill to be introduced after Brexit. People will be able to go to the Rural Payments Agency and get some sort of redress. That is not going down very well with farmers, who would prefer me to do it. At the moment it is foreseen that these will be two separate remits in the UK. If we overload something that is working with too big a task, there is a danger that we will not make the progress we have been making.

If I am hearing Ms Tacon correctly she is saying that she would not try to do this through one office. She advises keeping two separate operations.

Ms Christine Tacon

My experience is that I have been able to make an enormous impact by having one area to supervise. If somebody had given me the whole supply chain I definitely could not have made the same impact. I would leave it at that.

I would like to ask Ms Tacon's opinion on issues that keep coming up in discussions of beef prices, the share the primary producer gets and the markup charged by supermarkets and big retailers. I read Ms Tacon's opening statement before I came down. It refers to 13 regulated retailers. I have introduced a Bill to provide for price indexing in order to get some transparency in that area. While the Government cannot legally set a price, it can set requirements concerning the reporting of day-to-day prices. Such a measure would compel the processor to release this information every day. An observatory system would show the price the processor pays for different types of cattle of various ages, breeds, live weights, etc. Would Ms Tacon see something like that as an appropriate way to link the price paid by the retailer to that paid by the processor? Would that work? Is there a system in England to ensure transparency in the price the retailer pays to the processor? I refer to a system whereby the price retailers pay and the date on which they pay it is published on a daily basis. Does anything like that exist, or should it exist to make this market more transparent?

Ms Christine Tacon

I am sorry, but the Deputy is asking me about something I really do not know anything about. As far as I know nothing like that is available. I am sure we can check and let the committee know. As my remit has nothing to do with price, it is not something I have engaged with or tried to understand. I also do not know whether there is evidence anywhere in the world to show that better price transparency makes a difference to the primary producers. I am sure one could find out. I am not aware of anything like that in the UK and it is not something on which I take a view. It is not raised with me because people know I cannot do anything about it.

I thank Ms Tacon for her very informative presentation. I would have liked her comments to address the whole supply chain. However, that is not a criticism; Ms Tacon has outlined what she does in the UK and I accept that fully. If suppliers have more confidence in the supply chain, that must represent progress. Ms Tacon has said clearly that she has no involvement with the primary producer and her remit is between suppliers and retailers. We see some very attractive promotions offered in retail stores. Does Ms Tacon investigate who carries the cost for those promotions? In the past we have had a lot of allegations about so-called "hello money", which a supplier must pay to get a product onto the shelves of the big retailers. Has Ms Tacon heard complaints about having to pay hello money to get space on major retailers' shelves?

Ms Tacon has stated clearly to us that she has no input into the price paid by the consumer to cover the cost of production. She has no remit there, so I will not broaden my discussion into that area. She has also stated that her remit concerns the protection of the consumer. That is well and good, but we definitely have serious concerns about the primary producers and how long they can survive the price squeeze on them. I raised the protection of the consumer and of the supplier. Is the lowest possible price in the consumer's interest in the medium to long term? We are getting to the point where we must consider the quality of food being produced and how sustainable it is. I know Ms Tacon has clearly stated that the primary producer is outside her remit, but the consumer is within her remit. With respect, I would say that it is in the long-term interest of the consumer for the producer to get a viable return.

Ms Christine Tacon

To clarify, the remit covers anybody who is a direct supplier to a retailer. There are some very large primary producers in the UK, particularly horticultural producers of strawberries, lettuce or potatoes, that are the primary producers supplying the retailer. There are a fair number of primary producers that are included, but clearly beef and dairy are not. There are a lot of primary producers in horticulture that are covered, and I see and hear from them quite a lot.

The code actually provides that a supplier must not be required to predominantly fund a promotion. Nobody has ever spoken to me about that because promotional programmes are mostly determined at the beginning of the year. Although a supplier may predominantly fund a promotion during the promotional period, that supplier will have agreed at the beginning of the year to supply a retailer this year, during which time one promotion of this type of and two promotions of that type will be run. It has been agreed at the beginning. I get involved if the retailer starts to ask for further or deeper promotions than have been agreed at the outset. That generally comes under the rubric of variations to agreement. Generally I have said to suppliers that if they do not want to do those things they should push back against retailers. They can decline to vary an agreement. However, if sales have not been hitting targets it is probably as much in the suppliers' interest as those of the retailers to work with them. The issue of who predominantly funds a promotion has not been raised, but the practice of varying the agreement and trying to change what was already agreed at the beginning of the year has come up on quite a few occasions.

For hello money, which I would refer to as "listing fees", to be charged a product has to have been in less than 25% of stores within the last 365 days.

It therefore really has to be a new product, but it is very clear in the code that it must represent the risk to the retailer in stopping that promotion. I have held retailers to account in cases in which they have tried to charge for the cost of putting this product on display in every one of their stores. I have asked them to tell me how that is code-compliant as it is very clearly without the risk to them. Where I have heard about listing fees I have generally said the businesses involved must demonstrate that such fees are a proper representation of the risk to the business in taking them on. On the whole, listing fees have tended to disappear or go very much lower. They have not been raised as an issue for quite a long time. I think 12% of people who have not raised this with me have raised it as an issue in the survey. I hear things about both these issues and I have been tackling them as they come along. My role came from the Competition and Markets Authority - or the Competition Commission, as it was then - trying to ensure that so much risk was not being passed by the retailer to the supplier that small suppliers went out of business, large businesses stopped innovating and there was then less consumer choice. However, all the Competition Commission did was give me the tools of the code and the designated retailers, so I do not get involved beyond overseeing that those designated retailers adhere to the code. I do not go and check that consumers are getting choice and so on. That is still very much the remit of the Competition and Markets Authority.

I was not here for Ms Tacon's presentation but I read it, and it was interesting. The GCA has had significant success under the grocery supply practice code it introduced in the UK. That is obviously important. I am interested in how retailers interacted with the GCA in investigations. Regarding the competition authority in this country, in order to provoke an investigation the complainant must submit first-hand evidence, including affidavits and everything else. There is, therefore, a barrier to participation in those types of investigations in this country, which means they do not get off the ground. If they do get off the ground, people are very fearful and there is a fair degree of apprehension. How would Ms Tacon suggest we might overcome this, from her experience of dealing with this type of thing?

What statutory powers does the GCA have? Let us say it were to investigate me. It seems to work on the basis of working matters out in a mutually accepted way with the suppliers or retailers it deals with in the UK. Many of them seem to react to the GCA positively and they co-operate. Let us say I became a recalcitrant supplier or retailer. How would the GCA deal with me? What statutory powers would it have to deal with me? How successful is the invocation of the arbitration between suppliers and retailers? If the GCA got wind of the fact that there was a cartel operating in an industry somewhere, how would it set about investigating it?

Much of the evidence here is anecdotal, but there is real evidence. I know Ms Tacon is not touching this, but nevertheless this is the big cry here. We have had a lot of unrest about it for the past decade and a half but it culminated in recent events. We have one particular industry with four or five big players. How does Ms Tacon cope in cases in which there are big players within an industry? How does she try to sort those out? It is very easy when there is a small cohort of people, whether corporate entities or individuals, controlling an industry. There may be three, four or five, or perhaps one very big one. How would Ms Tacon deal with someone like that operating within an industry in which the casualties are the primary producers? I know she does not deal with primary production and is not down to that level.

Perhaps Ms Tacon does not deal with this type of thing, but regulations on unfair trading practices are being introduced at European level. If they were introduced in this country this evening, they would not come quickly enough. We are very eager that regulation in this area be widened in this country. Has Ms Tacon looked at the unfair trading practice regulations that will come on stream from Europe? I know that the UK will leave the EU if Mr. Johnson ever gets Brexit done, but in that situation I am sure Ms Tacon will still keep abreast of developments in the wider European context. There is the unfair trading practice regulation. I wonder about cases in which there is a significant imbalance between the bargaining power of the retailers and the effectively weak power of primary producers. We have primary producers who are basically farmers. They deal with perishable products - milk, meat and vegetables - so they are going into suppliers and they do not have any choice. There are people here producing vegetables costing a lot of money, but then we see the supermarkets selling 1 kg of carrots for 5 cent or something, which is totally mad, but that is the type of behaviour that goes on in this country. How would Ms Tacon stop that? How would she even attempt to stop it so as to achieve a fair standard of living for the people involved?

I will give Ms Tacon an example. She is probably aware of this and has probably read up on it before coming here, but the impact of unfair trading practices in Ireland on the primary producer is very serious because the primary producer gets, on average, 21% of the cost of the product and the retailer gets 51%. That speaks for itself. The primary producer knows he or she will never get to the point at which there will be a perfect balance. However, in order to get some degree of balance, some element of price and a throwback to the primary producer to give him or her an opportunity to survive, from Ms Tacon's experience of dealing with the grocery trade, what would she suggest we could do in this country to try to bring some degree of equity into that chain? I know the question is a bit unfair. Is Ms Tacon applying for a renewal of her job in 2020? She is not. There we go - she should be free to speak. Perhaps she could help us. Perhaps she could come over and get the job here. We have been talking about this problem for some time and have been very cowardly about tackling it.

Ms Christine Tacon

To address the Deputy's last point, my appointment is for a four-year term. I renewed it at the end of that for another three years and said at the time that I would not renew after that. I sincerely think that if I changed my mind, I would be given another three years. I just said I thought seven years was enough and that it was time somebody else had a go.

I wish to clarify something about the word "investigation". Investigation is one of my statutory powers. I have only done two investigations in my term in office, one into Tesco and one into the Co-op. I must be reasonably confident that a retailer is in breach before I initiate an investigation because obviously it is reputationally enormously damaging to the retailer for me even to launch an investigation. If I then find that the retailer is in breach, it must cover all my costs of doing the investigation. Both investigations cost over £1.3 billion, and both times I got that back from the retailer. We do not have anything anywhere near as convoluted as having to have first-hand evidence and so on. I collect evidence while I talk to suppliers. I have my survey and I work collaboratively with the retailers. I tell them when there are issues and give them a chance to put them right, asking them to report back to me when they have done so. It is only really when I feel they have not been able to put something right or that the harm was severe that I end up initiating an investigation.

The Tesco investigation arose out of the profit misstatement that the committee members will have heard about, which ended up being over £300 million. I asked the company to report back to me when it informed me that this was happening. Accountants were examining its figures. I asked the company to report back to me on any potential breaches of the code that these independent accountants found. The company gave me a report and I then said that I wanted it to do some more work. Tesco then compiled another report for me on the background to all of that. I then decided then that I needed to launch an investigation. I was fairly certain of the position by then, without any input from suppliers at all. Once I am in investigative mode, I have statutory powers. Whatever I asked Tesco and the suppliers for, they had to give me. It was quite a big shock to suppliers that there is no cover for their legal costs. Some of them spent six-figure sums gathering the information I requested. I had piles and piles, that would have probably gone from the floor to the ceiling of this room, of printouts of emails from suppliers and from Tesco that I had to go through. Once I am in investigative mode, I have statutory powers and I get whatever I need.

In the Co-op investigation, I was hearing about various issues and I asked the Co-op to report back to me on them. I was not happy with its responses and asked it to do some more work. I was still not happy with its responses. It was an 18-month process before I decided that it had not got the information to be able to find out where the fault lay, that it could be put right and that it could be proven to me that it could never happen again. I am going to have to investigate to find out the extent of what has gone wrong and what the Co-op needs to do differently in the future.

In neither of those cases did I have first-hand written evidence from suppliers. In the context of the questions I was asking the retailers, they were unable to give me responses that made me feel that I was on top of the matter and that it would eventually go away.

I have performed five case studies. Every one of those could have been an investigation. I raised an issue with a retailer, it went away and had a look at it and came back and said that I was right. The retailer put its hands up and stated that it had made a mistake, that it should not have done what it did and that it was doing various things to put it right. When the retailer had demonstrated that every supplier who had been harmed by it had been recompensed and that it had put in place processes to ensure that there would be no recurrence of what had happened, it was only then that I wrote it up as a case study and published it. That was not an investigation. There was some reputational damage involved but it meant that everybody could learn from what had happened.

When I engage in investigations, it is like the cases involving Tesco and the Co-op. The majority of my time is spent raising issues with retailers which they then must put right. I then use the survey to ensure that suppliers have noticed a difference and that things are getting better.

My other statutory power, and Deputy Penrose is correct, relates to arbitration. I have only concluded seven arbitrations since I started. I have made it very clear to retailers that I expect them to resolve issues and that if suppliers have issues, they have their own internal processes. If they bring an arbitration to me, they will generally, unless it is vexatious, have to pay all of my costs. As I have stated previously, I will charge them more on the levy if they cannot sort out something where somebody is bringing an arbitration case. On the whole, something that could go to arbitration is being resolved quickly by the retailers beforehand. The arbitrations that have not been resolved quickly have generally taken about a year. Arbitration is not a quick solution. I wish to make clear that I have been set up as an arbitrator, not as a mediator. There is a role for mediation but I suspect one could not be both the arbitrator and the mediator. Many of the issues that are arising require mediation, not arbitration. There is a need for somebody to get involved in order to try to resolve the difficulties and to get the sides to come together.

If I came across any evidence of cartels, I would probably go straight to the Competition and Markets Authority because the matter has nothing to do with me; it is a competition issue. There have been times when suppliers have told me things and I have said that it is a competition issue and that the party involved should the inform the Competition and Markets Authority.

Members also referred to sorting out the big players. The people I am working with are the big players. If I am honest, I have only had one retailer with which I struggled to engage collaboratively. At that point, I ended up informing it that our relationship was clearly not working. Every time I asked that retailer for a report, it was doing the absolute minimum. It was not sharing anything with me and we were not learning from each other. I told the retailer that if it did not want to work collaboratively with me, we could stop and it would then hear from me when I was about to carry out an investigation. The retailer was absolutely horrified and had no idea that I felt like that. It did not realise that it was far less collaborative than everybody else. The retailer asked if we could give it another go. It is now one of the retailers that I most enjoy working with because it really responds and does things. The threat of removing the collaborative approach was quite effective.

Whenever I am doing anything, I will give the retailer a response or red, amber, green, RAG, rating and state that it is running a very high risk of potentially breaching the code or that, compared with other retailers, it was doing very well. I will now show members one of the slides I brought along to support my comments. What they are seeing on screen is an example of where the first thing happening is the incurring of significant costs and where the cause of this is inaccurate forecasting by the retailer. I give each retailer its scores and if one gets a red score, I am basically saying, from the supplier's point of view, that it is running a relatively high risk of needing me to investigate in the areas highlighted. I tend to do that by showing them where the risk lies. This is very helpful for me in understanding which retailers I need to be working more closely with.

To give the committee an idea, this really plans my work out for the year, that is, knowing what the retailers are doing wrong. I thought, if this is my final year, maybe I should not carry out a survey because I will not be here to see it through and to push through the various actions that the next adjudicator might not want to do or to even use. When I first visited Aldi - the company has come top in that survey every year for six years - I asked if it wanted me to carry out a survey the following year. In terms of the survey, Aldi is obviously at risk of falling from the top position but it was the first retailer to say that it would really want me to do one. It indicated that when it is working on particular areas, it likes to see the progress and needs to know if there are any issues arising. I visited three more retailers who I asked and they all said exactly the same thing. They asked that I please do the survey as it was very helpful to them. I have not struggled in getting these so-called big players to work with me.

I answered a question earlier about the EU directive. Interestingly, there is something in the EU directive about intellectual property whereby if one is receiving information, that it should only be used for the causes for which one stated one wanted the information. That is quite an interesting one that we do not have in the UK, which I maybe look at with envy. The EU directive also refers to 30-day payment terms. When implemented, I expect it will state, "unless contracted otherwise". The idea of mandatory 30-day payment terms for food or perishable products is very interesting.

In the UK, we have also now got - this has nothing to do with me, it comes under BEIS - a duty to report where all businesses over a certain size have to report how fast they are paying people. It asks them for average figures. There has been an interesting dynamic in retail where retailers have worked out that if they pay all of their small suppliers really quickly, it makes one's average look really good. Quite a few of them are paying their small suppliers within 14 days. Incidentally, payment terms are not the responsibility of my office; I only ensure that people are paid on time. If someone has agreed to a 120-day payment term, I ensure that it does not take 125 days for payment to issue. The duty to report has had an interesting impact. We have also had a look at those figures and the retailers are now, compared with the rest of the sector, exemplary in paying on time and also as to the speed of payment.

The suppliers to the retailers who I am protecting are on the whole much worse. This is quite interesting as well in that are we doing the right thing in only regulating the retailers? There are other impacts, which is very much what this committee has been talking about, which is that if the people who are supplying the retailers are paying slower and late, that is then working towards the primary producers.

On the relationship between the adjudicator and the supplier, the committee has done much work in this area and would have seen a reluctance on the part of suppliers to come forward with evidence and information for fear that they might lose out on business and so on. How has that relationship worked in the adjudicator's sector and has the situation improved since her office opened in the past number of years?

Ms Christine Tacon

Getting suppliers to talk to me has been the biggest issue.

When I was going through the interview process for the role I asked if they were looking for someone who would roll their sleeves up and get involved or were they looking for a retired judge. They answered that they did not know. I have often said that if a retired judge had been appointed he or she would have sat in an office wondering what on earth he or she had been appointed for because suppliers will not come forward with information or give evidence and are concerned that such information will get back to the retailer even if one has a statutory duty of confidentiality. Therefore, a lot of my role has been about going to suppliers, making myself available, having private one-to-one meetings with them and building up a picture. Very often, when they start saying to me a certain retailer has asked me for this, I ask which retailer. I mean one will see they are worried and I ask, "Is it so-and-so?" One can then see how relieved they are to realise that I have already heard about it and they start talking, which really helps. I have my finger on the pulse to hear about these things and I am taking things forward without written evidence. I am just getting the stories together and realising that this is something I am now going to take up with a retailer or mention to every retailer.

Yes, I get an awful lot more cases now. I and my office have built up enough trust with people so they know they can tell us stuff. We probably get three or four things into the office every week. Very often, they will be, sort of, talking about what is reasonable notice of a de-listing but we do not give them answers and say, "Here is the guidance, here are the things that one should consider and one might like to read the co-op investigation". We cannot give them an answer because the case might come to me to arbitrate. On the whole, we point people in the right direction. The survey gives me another 1,500 responses. These things are so important because we can get information from people. The main thing I want to say to people is that there is safety in numbers. I will not take something forward that I have just heard from one person. Instead, I will wait until I have heard from more people or I will actively ask, perhaps, a trade association whether any of its members have experienced such and such.

I thank Ms Tacon for her presentation. Has anybody lost a contract as a result of approaching the adjudicator? Ms Tacon has explained how she tries to protect the suppler. Have there been cases where retailers have dropped suppliers because they asked the wrong questions?

Ms Christine Tacon

Not that I am aware of but I say to people that they must let me know if there are repercussions. When one of the major four retailers looked into an issue it decided that it was in the wrong and, as a result, re-instated the supplier. I asked how one could ensure that the buyer did not take it out on the supplier and remove the supplier at short notice and they said that they had already removed the buyer. Therefore, they recognise that one cannot help but take against somebody that has actually got one into trouble and they had already sorted the matter out.

Another thing that I frequently hear from retailers is that if they find out that somebody is doing this they will fire them. Quite senior people have lost their jobs over issues that I have raised. No supplier has ever said to me that he or she has lost business as a result of my intervention.

Ms Christine Tacon

In general, I do not intervene on behalf of a supplier. It is much more generic than that and is partly why I like the larger suppliers talking to me. When Morrisons tried to hit its half-year target for payments I heard it from lots of directions. So it is very much easier for me to raise that.

I can see that the work done by the adjudicator is effective. I suppose there are limitations in terms of what she can do when pricing is off the table. In terms of our learning from her, price is the elephant in the room.

Remarkably, the number of forensic audits have reduced from 45% down to 7% now. What is a forensic audit? When the percentage was 45% what were the main things that stood out?

Ms Christine Tacon

Some Members may not know what constitutes a forensic audit so, if I may, I shall explain the terminology. Many of the retailers use third party "no win, no fee" auditors to go through their emails and accounts to see if there is any evidence. By law, auditors are allowed to go back six years to find if there is any evidence that the supplier might owe them money. At the time, in 2014, the auditors used to find some scrap of evidence that something had happened and would send a bill to the supplier saying, "This happened five and half years ago, you ran a promotion, we should have charged €60,000 but we have no evidence that the €60,000 was paid, here is your invoice and, unless you can prove to the contrary, we are deducting it". That is what happened because the supplier could not find the evidence that quickly. Also, the instance was a long time ago so the accounts manager who set it up would probably have moved on. Therefore, many of the suppliers tried to settle with the retailer and offered to go 50:50 but they really struggled with trying to sort the matter and, as they had no evidence to the contrary, sums were deducted.

However, I said, "That is a delaying payment, you have given them goods and they have not paid you for those goods because they have deducted this money from it". My example of €60,000 is real and, luckily, the entity has managed to find the accounts manager who set this up and he said that the entity did not use their staff but its own staff for the promotion so the €60,000 was not due. As soon as the evidence was produced the issue went away. In many cases these third parties probably know that they will not get any money unless they produce proof. What tends to happen is that the first auditor working on the accounts takes a cut of, let us say, 5% of anything he or she finds, and then another auditor goes through the same data and if he or she finds something he or she might get a 15% cut. In some cases, as many as three auditors are used and by the time the third one goes through the accounts he or she will have taken 25% of anything he or she finds.

The auditors often work under the retailer's email address or addresses so no-one knows whether it is the retailer or auditor who has written. The aggression with which the auditors work is very threatening. Nearly all of this was allowed but the deduction is against the code. Going back six years and aggressively finding information did not break the code or law but, as it was such an issue, I raised it with all of the retailers. As a result, one by one they all agreed. It is unfair to go back so long so I said to them, "You are big businesses so you should be able to sort out your accounts within the current year plus one year". A representative of one business said that the business nearly went under due to the number of claims submitted. One also realised that many of the claims were right but the businesses did not know about them because the accounts manager had dealt with them under the table.

When I said to the businesses that they should sort out their accounts in the current year plus one year, one retailer broke ranks and suggested that it could sort its accounts out within the current year plus two years. Then I went around all of the retailers and I got eight out of ten of them to agree to not go back more than two years. One of the ten that did not agree has since agreed and some of the new retailers, with whom I now work, have agreed to this. We have been able to get everything cleaned up when it is much more likely to have the evidence and the memory inhouse. The audits were so aggressive and the decrease from 45% down to 7% was largely due to the voluntary agreement and because I mandated, after the Tesco investigation, that nothing could ever be deducted without giving a supplier 30 days' notice. If the supplier challenged the deduction the money stayed with the supplier until proof was provided.

Was there a change in legislation in terms of how far back the auditors could go?

Ms Christine Tacon

No, it is still six years. I call that a voluntary agreement because it is a voluntary one. To a degree the agreement has trumped it anyway because I have said that if a supplier challenges a deduction the money remains with the supplier until such time as the matter is agreed whereas, in the past, the retailer deducted the money and retained it until things were sorted.

Were there repercussions for the auditing departments?

Ms Christine Tacon

The auditing firms are getting less business than they used to.

Good. We have to solve the pricing problem but I want to discuss the variance in contracts that suppliers have. One can see the ones that perform okay and adhere to the code of practice. Has the adjudicator discovered models of good practice? The retailer must, at all times, deal with its suppliers in a fair and lawful manner, and in recognition of the supplier's need for certainty as regards risks and costs of trading, particularly in terms of production, delivery and payment terms. That sums it all up. At present the situation is completely unfair so introducing fairness into the market is what we want to achieve here.

Ms Christine Tacon


The key to resolving the matter lies in the contract between the supplier, retailer and producer.

Has Ms Tacon come across any contracts which are models of good practice which include fair forecasting that can give a level of predictability to the supplier for what they will receive for produce?

Ms Christine Tacon

No, but I do not look at things in that detail. I ask if there is a written supply agreement. Aldi and Lidl generally tend to be at the high end but they might get scores of 70% and they say this is ridiculous, that it is impossible to trade with them without a supply agreement. Sometimes they think they do not have a supply agreement but perhaps it is the case that someone else in the business signed it off. I do ask about issues around supply agreements and I tell suppliers that there should be no surprises. A supplier should know exactly what it will cost them if something goes wrong. Following the Tesco investigation all the retailers have become much more diligent in making sure that everything is properly recorded.

Contracts, prices and agreements are not such a huge issue, what is more interesting is that some retailers will agree a price for a time and then will keep it. What tended to happen was that retailers, having agreed something, would then think that suppliers had pockets of money and would ask for money for this or that and suppliers are not very good at saying no. Retailers were realising that by varying contracts and trying to bring in new things, they kept getting more money out of the suppliers. I would be much stricter about the variations on agreements, that there can be no unilateral variations of agreements without reasonable notice and trying to tell suppliers that if they ask for something - such as in the Co-op investigation where in the middle of a fixed-term pricing agreement, they suddenly started charging money for depot rejections and for benchmarking - that is not allowed because they are in a fixed-price contract. If they want to bring in money for depot rejections and benchmarking, that is possible but it is done during the next renegotiation. It cannot be brought in in the middle of a contract, which is what had been going on. I do not think that it still goes on and if it does, I need to be told about it.

Is it the case that it is not legislated for but is just left to the goodwill of the supplier and retailer in terms of the kind of contract which it draws up?

Ms Christine Tacon

In the order that the Competition and Markets Authority, CMA, oversees, it states that all agreements must be in writing and under the code and that any variations to agreements must be done with reasonable notice. That is covered but there is nothing that specifies it exactly. To be honest, there was a request to the CMA about what was going to be in a supply agreement. It got copies of everyone's supply agreements, went through them and came out with a very inconclusive paper which even discussed what the font size should be. I have often asked farmers to please be careful what they wish for. There are years of dreadful weather and if farmers have agreed to a certain price or volume and they cannot deliver that, they will have to import or find other ways to fulfil the contract. They must be careful about getting things defined in a contract.

The challenges in Britain are similar in terms of beef prices. Can Ms Tacon compare and contrast the contracts used in milk prices and at the milk mart as opposed to the beef suppliers?

Ms Christine Tacon

I have never seen any of those. I do not go into that level of detail so I am sorry but I cannot comment.

That is one of our key problems here in trying to find a model of vertical alignment that will meet the needs of the producers or at least introduce fairness for the producers into it. That is the key to how we will solve the problem.

Ms Christine Tacon

There were loads of unfair trading practices in the UK. Every single line of the code came from evidence found by the Competition Commission. On every one of those, I have had to work with retailers to get them to conform. That has made a difference. Even if one does not include the pricing, it will make a difference. As soon as one starts to include pricing, one makes one's job really difficult. It may make it a much more difficult thing to achieve. I would almost suggest going for the unfair trading practices, get them done and then consider whether there is anything that can be done on pricing. There is either a free market, and retailers can play suppliers against each other, which is clearly what they do because somebody is actually agreeing these prices, or they say there is which is what is pushing the prices down. It is really hard if one wishes to effect that at the same time.

It is and it is impossible to introduce fairness in the code of practice. It will never be achieved without our tackling the elephant in the room which is pricing.

Ms Christine Tacon

Except it has made a big difference in the UK in how the retailers are treating their suppliers. On the overall principle of fairness, which is paragraph 2 of the code, I have always said that there is no such thing as a breach of not being fair, there must be a breach of that and a delay in payment or not compensating people for forecasting. There must be more specifics underneath.

I apologise for missing Ms Tacon's opening statement as I had other meetings to attend. Her views are very interesting. She spoke of how arbitrations take about a year and how she regards that as being slow. That would be record time in Ireland for anything to happen. If we got to that point it would be an advance in itself.

I was interested in her remarks about the lead-in time in how her role established itself. Ireland has no similar role and that is something we are considering promoting. Ms Tacon has been in her role for six years. How long does she think is a reasonable time for building a relationship with suppliers and growers? What I am getting at is that we should not expect immediate results. If it was put in place here, one would expect it to take five or six years before seeing changes, or maybe a couple of years.

Ms Christine Tacon

My background was seven years at Mars confectionery and four years in what is now Fonterra, Anchor butter, cheese and cream, then I spent 11 years running a farming business. That was the Co-op's farming business, so it was a farming business within a retailer. We were one of the largest farmers in Britain and I grew a lot of fruit and vegetables which I packed and supplied to the Co-op. I took this job because I was getting frustrated with various practices which I thought were inefficient and were actually causing problems in the supply chain. As soon as I got into the job I tackled things straight away. I already had credibility with the farming community and needed to build the relationship with retailers. Even between 2014 and 2015 improvements had begun so there was an immediate impact. I tackled my issues, the ones I cared about, first but that was a way of getting started. Then it is a matter of getting the retailers to stop thinking that the code is something that one tries to find a way around or not getting caught, and recognise that I am talking about the fundamental culture in the business and how retailers behave. Unfortunately, the Co-op took too long to do that which is why I ended up investigating them. That is why all the recommendations are all about its corporate governance, legal and audit compliance and training because it should not have taken from 2010 when the code came into being until 2018 to be talked about. It took longer for the retailers to realise that I was serious, I was coming from them and that I was not going to let go of an issue until it was resolved.

Ms Tacon spoke a lot about the supply agreements. Is it the case that if something is in the supply agreement that Ms Tacon does not take a role on whether or not it is fair? Is it that she advises the supplier what should be in a fair agreement but that if it is in the agreement, they have signed up to it?

Ms Christine Tacon

The fact that things need to be in writing comes under the order which is overseen by the Competition and Markets Authority. I asked them about it and told them that I was getting lots of queries as to what should be in a supply agreement. It looked into it and did not come up with anything constructive.

To reiterate my point, I am particularly worried about primary producers signing up to things in supply agreements that could cost them a fortune. Some of the very large businesses talk about the so-called battle of the forms. A very big multinational will send its supply agreement to the retailer and the retailer will send its supply agreement back to the multinational and they never get to a final agreement because neither party is prepared to sign up for it. Some of the retailers' supply agreements contain terms like a £40,000 charge for an emergency product withdrawal. The supplier does not want to pay £40,000 so he or she does not agree to that but the retailer says that he or she must agree. The supplier says that he or she is not going to agree, such that when it ever happens, he or she can say that it is something that was never agreed. Trying to get everything written down on paper with two signatures on the end is naive, especially as an email sent by the buyer the next day can amend it. I am trying to make clear to the retailers that they need to keep track of everything that is potentially varying in the supply agreement.

What is driving a lot of what we are doing in this committee is the situation with the beef trade. Farmers are selling cattle to factories and the factories are selling the meat on. Both groups are blaming the supermarkets for the low price given to farmers but I do not believe they are to blame. Ms Tacon's office would not have a relationship with the farmers but with the factories. Is that correct?

Ms Christine Tacon

It is with the party that invoices the retailer, whoever that may be. It might be the third or fourth party in the chain. It is with whoever submits the invoice.

It could be somebody who is buying from the factory and selling on to the retailer. Is that right?

Ms Christine Tacon


It is not directly with the farmer.

Ms Christine Tacon

No, not unless the farmer is in horticulture. Very many farmers who are in horticulture are the direct suppliers. I do not know enough about Ireland but in the UK those direct suppliers, the primary producers in horticulture, are getting bigger and bigger. There has been a reduction in the number of middlemen. More and more growers are getting bigger and acting as middlemen for other growers vis-à-vis the retailers. Often they are growing in three or four countries around the world to maintain year-round supply. They have very good, close working relationships with the retailers and the retailers have long term contracts with them and are investing in those businesses. Those businesses have much better and much closer relationships. At the other extreme, I have seen retailers falling over themselves trying to work with small suppliers to get niche, original products onto their shelves to differentiate themselves from the retailer next door. I see a huge interest in those producers who have innovative products. However, as we both know, such products do not tend to be primary producer products but added value products like energy bars and so forth. Retailers are desperate for innovation, for products that make them different from their competitors. They are working much more closely with fruit and vegetable suppliers and growers. That may well be an impact of Brexit or it may just be maturity in the sector.

In terms of beef, we export 90% of what we produce. Of that 90%, half goes to the UK, which has an indirect impact on what we are talking about here. The supermarkets with which Ms Tacon is dealing see a lot of our beef products. Somebody along that supply chain is making a lot of money out of the process in comparison with the primary producer.

Ms Christine Tacon

When I visit retailers, I tell them that my day is theirs and that they can talk to me about they want. One retailer talked to me about who it was working with on beef, how it had been working with the same supplier for 20 years and had invested in that supplier. The retailer also said that it might as well sellotape money onto every single steak it sold. It was selling each one at a loss because it was paying the supply chain the right price. It had chosen to sell the beef at a loss. That retailer was making sure that the chain got paid the right price.

That is hard to believe.

That would not be the perception over here anyway. Deputy Corcoran Kennedy is next.

I thank Ms Tacon for her presentation. I am somewhat disappointed to learn that pricing is not an issue that her office deals with because that is what we are interested in. However, I am interested in the fact that the direct suppliers are covered by the code whether they are based inside or outside the UK. Has Ms Tacon had any engagement with suppliers outside of the UK? If so, what has been the nature of that engagement?

Ms Christine Tacon

Yes I have. I have been to Dublin quite a few times, talking to suppliers. I have also been to Murcia in Spain to talk to suppliers. The survey that I conduct each year is sent by the retailers to their suppliers. They send it to their database of suppliers and generally around 15% of the responses are from overseas. It will not surprise the committee to hear that Germany, the Republic of Ireland and Spain feature prominently in a list of about 25 countries. I have not noticed anything different about the overseas suppliers apart from the number of them that are trained in the code. I suspect that is because the training is available in the UK. I am not finding that the overseas suppliers are unaware of the code but that they have not necessarily been trained in it.

It was very clear when I was conducting the Tesco and Co-Op investigations and reading thousands of emails that there was very little difference between UK and overseas suppliers. I decided that the suppliers I would speak to had to be both large and small, own label and brand, overseas and across the UK. I tried to make sure that I spoke to suppliers in every category. I had to speak to a large number of suppliers before I even started the investigation proper to be representative. In both investigations I can say that the only real difference between how suppliers were treated was based on whether that supplier was own label or brand. There was no difference between large and small, overseas or UK and so on but there was quite a difference in the treatment of own label versus brand suppliers. Many of the retailers see own label suppliers as an extension of their own business and, as a result, they treat them better.

That is interesting-----

Ms Christine Tacon

From the code point of view. They treat them better from a code compliance point of view.

If Ms Tacon receives a complaint relating to pricing, does she have to refer it to a separate body?

Ms Christine Tacon

I just tell the complainant that it is not something with which I can deal.

Is it something that she thinks she should be dealing with?

Ms Christine Tacon

No, I do not think so, but that might just be because I have not been speaking to the right people in the chain. The direct suppliers in the chain have virtually never raised issues of pricing. They have raised issues about, for example, Tesco and Booker merging and Tesco putting them under pressure on pricing. I told them that such issues are a matter for negotiation and that, if they were in Tesco's shoes, they would do the same. I told them that they have to negotiate and to know when to say "No". People talk to me about tough negotiations but not about the fact that they are being pushed to a point where they cannot afford to continue, which is what I sense is happening here with primary producers. It is the case that for the first six months solid, I was explaining my role to farmers. They knew me as a farmer because I had been in the farming community for 11 years. I had to explain that my role was not to protect them unless they were a direct supplier. There was huge disappointment around that. A lot of farmers thought that pricing would be covered but it is not. I urged them to push for my remit to be changed if they believed something needed to be done. I cannot decide to get involved in these other areas.

Something that came up when we were considering this previously, apart from the fact that the price farmers are receiving is too low, is that they are not being adequately compensated for the so-called fifth quarter of the animal, a lot of which goes into the pet food industry. Pet food is a massive industry, running to billions in Europe. That is another issue here. Would legislation be required to change the remit of the Groceries Code Adjudicator to including pricing?

Ms Christine Tacon

Yes, definitely. I think it is highly likely that it would require another Competition and Markets Authority investigation to determine whether there was market failure and whether it was something in which we ought to get involved.

They would be looking at it and making sure the consumer is not being disadvantaged. That is the crux of it. Competition authorities would want the free market.

A question has crossed my mind, and I will not touch on the area of agriproducers as the UK Groceries Code Adjudicator's role on them is well established and we have all come in here with that in mind. I am intrigued to know whether any Irish-specific issues cross Ms Tacon's desk. Where I am coming from is the nature of the island. A retailer's Irish branch may buy a product through a central distribution area in the South and the product may end up on a shelf in Northern Ireland, which is within Ms Tacon's jurisdiction. However, it was bought by the retailer outside the area of her jurisdiction. Has such a case ever crossed her desk?

My next question is probably as unanswerable as my question on primary producers. It is with regard to Brexit. If the UK remains in the EU how does Ms Tacon see the EU directive on unfair trading practices affecting her role or the code? Will one supersede, complement or supplement the other? If the UK leaves the EU, how structurally strong does Ms Tacon believe the code will be when Boris is chasing all over the world to track down food and do overnight trade deals? Will the code be strong enough to stand up in that scenario? We often hear about the race to the bottom which a lot of people predict may happen. Will the code be strong enough in such a scenario? I know it will depend on the outcome and nobody can answer that.

Ms Christine Tacon

In terms of southern Ireland's supply to Northern Ireland, if it is with regard to the same retailer it would be covered by the code. I have been particularly having discussions with Lidl about its Northern Ireland supply because the legislated entity Lidl UK did not used to include Northern Ireland. Its definition of the UK did not have Northern Ireland in it. It cannot avoid the code by going through southern Ireland to get into Northern Ireland as that is still covered by the code. Similarly, a retailer cannot go through a third party that is working for it to avoid being covered by the code.

To use the same example as Ms Tacon, if Lidl Ireland purchases a product and due to having a central distribution area it ends up on shelves in Northern Ireland-----

Ms Christine Tacon

Or ends up in the UK. I would then speak to Lidl UK, particularly if the suppliers were saying they had a problem with what had just happened. I would be speaking to Lidl UK about it and asking it to solve it, even though I would know it was Lidl Ireland that had-----

Has this been an issue? That is the question. Have there been situations where this was an issue?

Ms Christine Tacon

There have been very few. I have a feeling there was one, which is why I have been around this loop, but I cannot remember what it was and it was not anything major. I tend to run things across the desks of retailers sometimes, just to make them aware this could be an issue and to think about what would happen if it got bigger. Some people have felt that some of the retailers have been going through third parties in other countries, such as Italy, to try to avoid being covered by the code. The retailers have been denying this, saying this was not the reason they did it.

There was another question on whether the code would be strong enough after Brexit. I think so but the code was never written to do things such as protect food standards or deal with animal welfare or child exploitation. These things do not fall under the code. I do not know what it goes under but it is not under the code. I hope it will be covered by other areas. The UK Department of Environment, Food and Rural Affairs has said there will not be any slippage of standards but we shall wait and see. The code is much more about how suppliers are treated in terms of their agreements. It does not cover the nuances of welfare and health and safety. I hope they will be covered elsewhere.

In a Remain scenario where does Ms Tacon see the UK's relationship with the unfair trading practices directive?

Ms Christine Tacon

I do not know that either. That would come under the UK Department of Business, Energy and Industrial Strategy. I mentioned earlier that I have not been involved, nobody has mentioned to me and I have not had any indication it is doing any preparation for how it would adopt the EU directive if that should happen. I would find it very interesting as it is very different. Our legislation is about protecting the consumer and it was designed by the Competition and Markets Authority while the EU directive is coming from a different direction, which is trying to protect the final producer.

I apologise for being late but I have read over the presentation. Recently, the Competition and Consumer Protection Commissioner came before the enterprise committee. This was on the back of the beef protest, of which I am sure the witnesses are aware as they will have read the news in the UK. Its representatives acknowledged in their presentation that the body was not equipped to address the issues that arose which led to the crisis and the beef protest in the State and that a regulator, another body and another range of legislation would be needed to address them.

The issue of cartels arises, and in her presentation today, Ms Tacon referred to the UK counterpart of our Competition and Consumer Protection Commissioner. This is where I have concerns. While I have to say the presentation was very encouraging and there is certainly an awful lot we can learn from the model in Britain, frankly, we need to go further. Ms Tacon does not need to engage with me at this point as I just want to give my perspective on this.

The agricultural model we have developed in the European Union, and it is not unique to the European Union because I watched a documentary in recent days about the situation in the United States, is one in which those in the farming sector are forced to adapt to an economic model that is very hard to sustain and is very vulnerable very quickly to sharp changes that can devastate entire sectors. I feel people have been forced away from sustainable, traditional farming models into models that are not sustainable, or certainly are not sustainable without significant European subsidies. This is not unique. In the United States the agricultural sector is heavily subsidised and oriented towards a particular economic model. What has happened in this State is we have meat producers who, whether we want to accept as a cartel or not, by some remarkable coincidence happen to have prices at a particular level. The entire sector is export oriented. It is an industry. The practices being used are not good for the environment. I am speaking about an overreliance on nitric fertilisers when there are other traditional models. There are attempts in the State to redirect farmers towards them. I do not see a solution to our crisis in any model.

Is Ms Tacon aware of a model in Europe or internationally that can protect farmers? Do they need to come together to form beef producer organisations or co-operative organisations through which they can have strength? As she is coming to the end of her term, does Ms Tacon have a perspective on this? I am frustrated because the Competition and Consumer Protection Commission came before us in recent weeks and stated the issues being raised are not under legislation or its remit, that it sympathises with what is being raised but that new legislation and a new position need to be created to do it. That is the advice we received from it.

Ms Tacon said cartels are not the adjudicator's area of responsibility but is she aware of a model that addresses the issues internationally? Do we need to just go and make it happen?

Ms Christine Tacon

My understanding is that horticulture, pigs and poultry in the UK are, on the whole, unsubsidised and producers are remarkably commercial and professional in the way they do things, whether they deal in strawberries or potatoes or have a salad business with a turnover of €500 million. There are sweetcorn and squash businesses and most strawberry producers have a turnover of over €100 million. Some of them have got very big and the retailers have to work with them on proper long-term relationships, often investing in them to bring everything forward. Some have invested in large greenhouses and have effectively invested in the price to help people become professional. These people are unsubsidised so they are working on long-term relationships between retailers and suppliers. The wonderful thing about consumer pressure is that businesses are trying to become better at what they are doing and there is huge pressure from retailers in the area of packaging. Some are thinking of de-listing people who cannot move with them in this area and there have been good moves in the context of the sustainability agenda. The sectors work well and are moving in the right direction. The carbon agenda means producers are telling retailers how they want to do things in the area of carbon and packaging. They have solutions and can address these things.

The Senator suggested that there was an over-reliance on nitrogen in the meat sector and there is a glimmer of hope in the shape of the UK agriculture Bill. There is a lot of pressure in the UK for people to pay farmers for what they are doing for the environment, rather than to subsidise prices. It will be difficult but the will is there to do things in another way once we get out of the CAP. I would not, however, advise copying it until people here see how it works. The pressure is there to pay people for sustainable production. This is nothing to do with the price but with the exploitation of land and making sure land is kept in a good state for that purpose.

Ms Tacon has worked with the agriculture sector and with business.

Ms Christine Tacon

I ran a farming business for 11 years.

I came across a very interesting model from the mid west in the United States, with an organic farmers' co-operative comprising members whose herd size did not exceed 100. Animal health was of an extraordinary standard and collectively, from the producer right through, they had put together an extremely exciting product. The agricultural sector in the United States is very industrialised but this seems to break the mould and examples are emerging of sustainable farming practices. My frustration, however, is that the European Union farming model goes against the interests of rural communities in the long term and we are starting to see that unravel. I am interested in what Ms Tacon said about subsidising people who adopt good, sustainable, environmental practice rather than meeting an economic model through a cheap food policy. I am continually searching for best practice internationally in this area. Ms Tacon is an adjudicator who is implementing legislation but I feel we are not joining up the dots internationally. Whenever farmers come together to demand better prices for their products they are told it is against the market. The legislative framework seems to protect the major meat factories rather than assist farmers to come together to get a fair price. It protects markets rather than rural communities.

Is there more integration between retailer and supplier in terms of technology in the UK? I am thinking of e-commerce platforms. When I worked in a previous job a lot of major retailers were working on e-commerce platforms in order to amalgamate their buying power.

Ms Christine Tacon

Is the Deputy referring to e-tenders?

No. Where a number of retailers want to buy, say, batteries, there would be a platform and they would mine the data to see how many batteries they could buy or sell over a period of three or four months. They can also use the data to go back to the supplier to say they will buy a given number of batteries but at a certain price, thus driving down the cost. Has this practice progressed within the supply chain? If so, is it counteracting any competition there might be in the market? I call this "technocracy" which makes supply chains quite rigid. The supplier feels they are locked in by the technology and that the cost of removing themselves from the position is too high. It beds down the relationship a bit more and the technology, which may have been a positive in the first instance, may become a negative when the cost of moving to another relationship is too high.

Ms Christine Tacon

I have been hearing more about people who have developed compostable packaging but have been locked into using one retailer for a certain length of time, owing to the retailer wanting exclusivity for the product. In other cases, a retailer might have invested in a method of production or packaging or in a glasshouse but these things are generally properly agreed by the parties beforehand. The Deputy referred to buying alliances and Tesco and Carrefour have a buying alliance across Europe. The Deputy gave the example of batteries and these things are done to see if retailers could have big wins by acting together. The impact of Tesco and Carrefour buying things together across Europe is massive. People talk about things like blockchain and, in particular, traceability back to the farm gate so that one knows exactly what an animal has been treated with. I can see how claiming full traceability by using blockchain technology could make switching suppliers much more difficult. The Deputy is anticipating something that I am not sure has yet bitten, though that is not to say it will not at some stage.

I thank Ms Tacon for her presence today. It has been a very informative discussion and will enlighten further conversations we have as we go forward. We are in the process of addressing unfair trading practices that have been passed on from the EU.

That will feed into our discussions over the next number of weeks and months. The discussions today have been very useful. I again thank the witnesses for their contributions and thank the IFA for facilitating their presence here today. We will suspend for a few minutes to complete this part of the business and will resume in private session.

The joint committee went into private session at 5.22 p.m. and adjourned at 5.30 p.m. until 3.30 p.m. on Tuesday, 12 November 2019.