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February 5, 2015

Grocery watchdog to probe Tesco over supplier abuses

The UK's Grocery Code Adjudicator has launched an investigation into Tesco's dealings with its suppliers following September's profit-overstatement scandal.

The UK’s Grocery Code Adjudicator has launched an investigation into Tesco’s dealings with its suppliers following September’s profit-overstatement scandal.

Last year a GBP263m (US$424.6m) black hole was uncovered in Tesco’s accounts after the books were apparently manipulated by bringing forward payments from suppliers and delaying costs. The accounting scandal placed Tesco’s relationship with its suppliers in the spotlight, with growing concern over practices that could amount to supply chain bullying.

In an announcement this morning (5 February), the GCA, Christine Tacon, said that there was “reasonable suspicion” that the retailer has breached the Grocery Supply Code of Practice by delaying payments to suppliers. “This is the first investigation I have launched and it is a significant step for the GCA…. I have applied the GCA published prioritisation principles to each of the practices under consideration and have evidence that they were not isolated incidents, each involving a number of suppliers and significant sums of money.”

The probe will focus on delays in payments associated with: short deliveries, including penalties; consumer complaints; invoicing discrepancies; deductions for “unknown” or “un-agreed” items; incorrect gate fees for promotional costs; or deductions for historic promotions that had not been agreed. The Adjudicator will also consider instances where suppliers were required to make payments for better shelf positioning that were unrelated to a particular promotion.

The GCA is calling on suppliers to come forward with evidence of such practices by 3 April. The investigation will be conducted over the next six to nine months.

The GCA said that the scope of the investigation is currently limited to Tesco and its supplier dealings. However, the watchdog added: “If during the course of the investigation evidence is presented to the GCA which indicates that the same practices have been carried out by other designated retailers, consideration will be given to extending the scope of the investigation to include them.”

Tesco is already facing a number of investigations into the profit overstatement, including enquiries from the Financial Conduct Authority and Serious Fraud Office.

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