Tesco "seriously" breached grocery code, says supplier watchdog Groceries Code Adjudicator

Lynsey Barber
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Tesco breached the grocery supplier code (Source: Getty)

Tesco has been given a slap on the wrist over its relationship with suppliers during the lead-up to the accounting scandal which rocked the supermarket in 2014.

Supplier watchdog the Grocery Code Adjudicator (GCA) said Tesco seriously breach of the code of practice, prioritising its own finances over treating suppliers fairly and acting unreasonably when delaying payments to suppliers, often for lengthy periods of time.

The retailer must make significant changes to the way it handles supplier payments as a result of the findings. In one instance, the GCA said a supplier owed money because price changes were applied incorrectly had to wait two years for the cash, which ran into the multi-millions of pounds.

The GCA was handed powers to fine supermarkets up to one per cent of annual turnover if they were found to breach the code. However, those powers could not be applied to Tesco as they came into effect after the breaches were committed.

“The length of the delays, their widespread nature and the range of Tesco’s unreasonable practices and behaviours towards suppliers concerned me. I was also troubled to see Tesco at times prioritising its own finances over treating suppliers fairly," said adjudicator Christine Tacon.

She noted that there had been improvements to Tesco's processes since the period investigated, between June 2013 and February 2015.

Tesco said it accepted the findings.

“In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the adjudicator, and publicly apologised," said Tesco chief executive Dave Lewis.

"Today, I would like to apologise again. We are sorry," he added.

The investigation is one of several by various authorities into Tesco's misreporting of profits, and the first to conclude its findings.

The Serious Fraud Office is due to make a decision in its own criminal investigation into the supermarket. Its findings could come as soon as this week.

The supermarket sector faces further scrutiny over supplier payments as a result of the investigation.

The GCA said it will launch a consultation on the practice of shelf positioning. Tacon found no evidence Tesco required suppliers to make payments to secure better shelf positioning or an increased allocation of shelf space.

However, she did find evidence of indirect requirement for better positioning.

“I am concerned that as a result of these practices the purpose of the code may be circumvented to the detriment of smaller suppliers who cannot compete with payments for better positioning, category captaincy or to participate in range reviews," she said.

“I have decided to launch a formal consultation with the sector, involving both retailers and suppliers, to help me reach a firm conclusion on whether these practices are acceptable.”

The evidence against Tesco has also been referred to the Competition and Markets Authority in case it breached rules by not having terms of supply agreements in writing.

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