Ombudsman finds Tesco guilty of ‘serious breach’ in treatment of suppliers » SMEInsider

Ombudsman finds Tesco guilty of ‘serious breach’ in treatment of suppliers

Tesco is facing a backlash after the Groceries Code Adjudicator (GCA) published the findings from its investigation into claims the retailer had delayed payment to suppliers.

Adjudicator Christine Tacon announced today (26th January) the outcome of an investigation covering the period from June 2013 to February 2015, during which Tesco was found to have seriously breached a legally binding Groceries Supply Code of Practice, aimed at protecting grocery suppliers.

The findings highlighted three main areas of concern: that Tesco – Britain’s largest retailer – made unilateral deductions from suppliers; the length of time it took to pay some suppliers; and some cases of intentionally delaying payment.


Fine not possible

The GCA was set up in 2013 to oversee dealings between supermarkets and their suppliers. Its remit includes to ‘name and shame’ companies that act unfairly or illegally, to issue recommendations and, since last year, to fine up to 1 per cent of a company’s annual revenue.

However, Tacon cannot fine Tesco in this case, since the breaches took place before the government bestowed upon the supermarket ombudsman the power to impose financial penalties.

She has made five recommendations to address the “serious” breaches, which include to stop making deductions to suppliers, to correct pricing errors within seven days of being notified of them, and to introduce training for its finance team and buyers to implement changes.


Retailer’s ‘weak’ practices

Tacon said: “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.

“My recommendations will deal with the weaknesses in Tesco’s practices during the period under investigation. I believe that [they] will lead to significant improvements at Tesco and in the sector. ”

The investigation was launched last February after Tesco announced its profit over-statement, and Tesco will be given four weeks to say how it plans to implement the recommendations.


Small suppliers on the back foot

Claims against the retailer also included that it charged suppliers for better shelf positions. Although Tacon found no evidence of this, she was concerned about practices that could effectively amount to paying for better shelving positions, which would disadvantage small vendors.

Tacon added: “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.

“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.”