Tesco faces groceries code probe for ‘supplier abuse’

By Michael Stones contact

- Last updated on GMT

Groceries Code Adjudicator has 'reasonable suspicion' Tesco breached the Groceries Supply Code of Practice
Groceries Code Adjudicator has 'reasonable suspicion' Tesco breached the Groceries Supply Code of Practice
Claims that Tesco treated its suppliers unfairly are to be probed by the Groceries Code Adjudicator (GCA) Christine Tacon, but no financial penalties can be imposed if evidence of wrong doing is revealed.

Launching the first official investigation into possible breaches of the Groceries Supply Code of Practice (GSCOP) , Tacon said she had “reasonable suspicion” ​that the beleaguered supermarket had breached the code.

Her investigation will probe whether Tesco unfairly delayed payments to its suppliers and unfairly required them to pay for positioning of products in stores.

Evidence of suspected breaches came from three main sources. “I have evidence from the Deloitte report, an internal report prepared for me by Tesco and from suppliers,”​ Tacon told BBC Radio 4’s Today​ programme. The adjudicator had also drawn on evidence from trade associations.

Suppliers with evidence that Tesco behaved unfairly were urged to contact the GCA by April 3 2015. “Part of this investigation is a call for evidence,”​ said Tacon. “Documents from Tesco will lead me to contact certain suppliers who are required to supply information,”​ she told the programme, adding that she had a legal duty to preserve their anonymity.

‘Name and shame’

But even if evidence of wrong doing is revealed, the adjudicator warned that at present she lacked the power to impose financial penalties on the supermarket. “I can require them​ [Tesco] to name and shame ​[itself] but no financial powers as yet.”

This was because any offences committed would have taken place in the period before which she was granted powers to impose fines.

Tesco faces three probes

  • Groceries Code Adjudicator
  • Serious Fraud Office
  • Financial Reporting Council

Business secretary Vince Cable said in a statement: “This is an historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth.”

He added: “Last week I secured the final agreement in government to proceed with legislation to enable the regulator to impose hefty fines for those supermarkets found guilty of mistreating suppliers.”

‘Hefty fines’

Cable said he had agreed a near 40% rise in the adjudicator's 2015 funding to facilitate her important work.

A Tesco spokeswoman told FoodManufacture.co.uk the retailer had worked closely with the office of the adjudicator since its creation to put in place strong compliance processes.

“Following our announcement last September regarding commercial income, we have worked with her to identify any relevant GSCOP issues,” ​said the spokeswoman. “An internal review we carried out and shared with the GCA identified some areas of concern.

“We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with suppliers. We will continue to cooperate fully with the GCA as she carries out her investigation and welcome the opportunity for our suppliers to provide direct feedback.”

The latest investigation followed two other probes into Tesco’s conduct, after it admitted overstating its half-year profits last summer by £263M. The two other investigations are being conducted by the Serious Fraud Office and the Financial Reporting Council.

Her investigation is expected to last about nine months.

Read why Shore Capital believed the adjudicator faced a Catch 22 challenge​ over her Tesco investigation.

Do you have evidence Tesco behaved unfairly towards its food and drink suppliers? If so, contact Michael.stones@wrbm.com​ in complete confidence. 

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1 comment

Supermarkets

Posted by Philip Rhodes,

The case re Tesco, that Christine Tacon is looking into, is not just an isolated case the custom of selling sales space has gone on since I first worked in a Supermarket in the early 1960s. The top leading Supermarkets have also been involved in causing suppliers to go out of business by failing to pay their accounts on time, or delaying payment by a month or two and at the end of a financial year insisted on a large end of year discount from the supplier on the amount spent by them

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