Price controls on essential food items: consultation paper

Chapter 7: Compliance and enforcement

Any price cap scheme would require effective, proportionate and cost-effective monitoring and enforcement. We are seeking views on the methods of ensuring compliance and enforcement of any regulatory regime. The proposed core duty of a price cap scheme relates to selling specific food products at or below a set price, and so monitoring those products sold in store and online will be necessary. There are a variety of ways this could be done, for example through direct inspection, regular reporting and/or data collection.

The requirements of any future price cap scheme will directly impact what is needed to ensure compliance and what action would be required by those carrying out the enforcement. For example, as discussed in previous Chapters, an alternative scheme could involve providing flexibility to the retailer by applying a cap on a basket of items. This could allow for greater competition and allows retailers to adapt to supply chain issues, but monitoring compliance would become significantly more complex, with a direct visual inspection no longer a viable approach.

Who carries out enforcement, how this is done and what is an appropriate penalty for any non-compliance are critical questions for any scheme.

These issues are explored in this Chapter. The relevant part of the illustrative draft provisions in Annex A is Part 2, titled ‘Enforcement’.

What is the proposal?

The Scottish Government considers that any price cap scheme would require a proportionate and effective system for monitoring compliance and addressing instances where qualifying businesses fail to meet their obligations.

It is proposed that local authorities would be responsible for enforcement and they would appoint authorised officers to undertake day-to-day enforcement. The principal enforcement tool would be a compliance notice, issued by authorised officers where they have reasonable grounds to believe that the qualifying business is failing or has failed to comply with the price cap duty. Failure to comply with a compliance notice would be an offence and a fine may be imposed.

It is also proposed that further detail about the enforcement system would be set out in Regulations. This would be expected to include provision of information and keeping of records, the content and form of compliance notices, the powers of authorised officers, any additional offences or penalties in connection with failure to comply with the price cap duty and the creation of defences to any offences.

The proposed approach is intended to encourage compliance in the first instance rather than immediately creating criminal liability for isolated failures. If a qualifying business is found not to be complying with the duty, a compliance notice would be issued, providing an opportunity to rectify the issue before any offence is committed.

Discussion points relating to support for compliance and enforcement

Responsible Parties

In the case of other legislation, such as the sale of alcohol to minors, it is the responsibility of the person carrying out the sale (i.e. individual employee) to ensure that the person they are selling alcohol to is at least 18 years old. However, in this context we assess that it is more appropriate to put in place a regime that ensures a qualifying business as a whole is taking steps to carry out compliance with any price cap scheme.

While complying with a price cap on an individual food item could feasibly be conducted by a store manager, or any other employee on site, the undertaking becomes more complicated for individual stores when multiple food items are subject to a price cap. Monitoring stock availability at this scale, particularly where reference must be made to prices prescribed in regulations, may be a considerable burden for individual stores. In our view, responsibility for compliance would be more appropriately managed at a business level, with the qualifying business as a whole ensuring the appropriate procedures, training and systems would be in place to ensure compliance with the price cap duty rather than placing this obligation on an individual within a premises.

This is likely to be an even more important factor in the case of alternative scheme designs such as the capping of a basket of goods. This more flexible option would likely require a relatively complicated calculation that would shift over time within that basket of goods.

However, we would welcome views on whether you believe this should be the case and where responsibility for compliance should sit.

Compliance notices and consequences of failure to comply

Complying with the price cap duty will require a level of undertaking by the qualifying businesses concerned. We understand that there may be administrative errors which result in accidental incorrect pricing and complications, including delayed re-pricing, when the price cap range of a particular food item runs out and an alternative range of the same food item needs to be re-priced at the capped price. As such, we appreciate that there may be circumstances in which businesses temporarily fail to sell items at the required price, and do not believe it would be right to prosecute a qualifying business for inadvertent or isolated errors. What is important to the success of the policy is that qualifying businesses generally comply with any price cap requirements put in place.

For that reason, we have suggested a compliance notice process as the first stage in enforcing the duty to sell certain products at a capped price. This model would allow a period of time for the qualifying business to address the issues highlighted in the compliance notice. We invite views on this proposal, as we recognise that allowing a period of time for compliance has potential to undermine the advantage to the consumer of the requirement to substitute.

It is proposed that compliance notices would be issued by an authorised officer, who has reasonable grounds to believe that a qualifying business is failing or has failed to comply with the price cap duty, requesting that any breach of the duty be rectified within a specified time period. Where the qualifying business rectifies the issue and complies with the notice, no offence would have been committed, and no penalty would therefore be applied.

However, should the qualifying business fail to do what is required by the compliance notice within the specified time period, an offence would be committed. At that point, the local authority could pass the matter to the Procurator Fiscal. The draft provisions provide for two types of penalty; (1) a fine under summary procedure up to the statutory maximum (currently set at £10,000), and (2) an unlimited fine prosecuted under solemn procedure. The decision about the most appropriate penalty would be decided by the court, taking into account all relevant circumstances of the offence.

Issuing of fixed penalty notices is an alternative form of penalty for consideration. By issuing a fixed penalty notice the recipient would be provided the opportunity of discharging any liability to conviction for an offence by paying a fixed sum of money within a particular period. The issuing of a fixed penalty notice by an authorised officer would be an alternative to prosecution. However, if it was not paid, the option of prosecution would remain open. We would be interested to hear your views on the benefits or disadvantages of the option of a fixed penalty as an alternative to prosecuting offences by way of a fine as currently provided for in the draft provisions.

It is envisaged that the compliance notice process would include an appeals process. The appeals process would allow a qualifying business to challenge a compliance notice, and an appeal would suspend the compliance period while an appeal is pursued. Provision for this would be made in regulations.

Regulations could provide further detail about enforcement, including about defences, and ancillary offences, for example an offence of the obstruction of, or misleading, authorised officers by providing incorrect information, may be specified in regulations.

Overall, we anticipate that most cases of non-compliance would be dealt with by rectifying errors following the issuing of a compliance notice. The illustrative model does not currently outline how instances of repeated non-compliance could be managed. We welcome feedback on how best repeated breaches of the price cap duty could reasonably and proportionally be dealt with.

Enforcement

As noted, we propose that responsibility for monitoring compliance and enforcing a price cap duty would fall to authorised officers within local authorities. We would welcome views on the expected benefits or issues associated with that approach. We are also interested to hear about whether you believe any other regulator or body (existing or new) should have responsibilities in the context of compliance and enforcement. In the case of local authority enforcement, we would welcome views on preferred cost recovery models to ensure that enforcement can be appropriately resourced.

The question of how to ensure compliance and carry out enforcement in the context of online sales of price capped essential food items is an important one. We recognise that enforcement of online sales could present challenges, especially where retailers, websites or supply arrangements operate across border. We are seeking views on how these issues could be addressed.

Reporting requirements

The illustrative draft provisions would not impose a requirement on qualifying businesses to submit pricing or compliance information on a routine basis. We are interested in views on whether regular reporting obligations would be desirable, and what information would be necessary and proportionate for that purpose. Although likely to add to administrative costs for retailers, this could be helpful in the context of monitoring compliance where sales take place online and a visual inspection by enforcement officers at physical premises is not possible.

Costs associated with compliance

The detail of the specific scheme taken forward would have a direct impact on the costs for qualifying businesses in ensuring compliance with their obligations. As such we expect to make more detailed assessment of the costs of complying as this policy proposal evolves. We would nevertheless welcome views on the likely burdens that would arise with respect to price capping to help with that assessment.

Consultation questions

33. Do you believe local authorities are best placed to deal with the issue of compliance and enforcement for any price cap scheme? [Yes. No. Unsure].

• Please explain your answer, detailing any alternatives you wish us to consider.

34. Do you believe the approach to offences outlined in the consultation is the correct one? [Yes. No. Unsure].

• Please explain your answer, detailing any alternatives you wish us to consider.

35. Do you believe a fine imposed by the courts is the most appropriate penalty for the offence of failure to comply with a compliance notice? [Yes. No. Unsure].

• Please explain your answer, detailing any alternatives (including fixed penalty notices) you wish us to consider.

36. What information, if any, should qualifying businesses be required to provide or retain to demonstrate compliance with a food price cap scheme?

37. What are likely to be the burdens, costs or practical implications of ensuring compliance with a food price cap scheme for:

• Qualifying businesses
• Local authorities

38. What other issues should be taken into account when considering the question of compliance and enforcement of sales taking place online?