Blog: Dean BestUK grocery adjudicator could receive power to fine

Dean Best | 2 February 2015

Tacon could soon see powers extended

Tacon could soon see powers extended

The UK grocery watchdog may be handed the ability to fine supermarkets that breach the code that governs their relationship with suppliers.

The UK government has announced it will put before Parliament plans to give the Groceries Code Adjudicator the power to impose fines of up to 1% of annual turnover.

At present, the GCA, former Mars executive Christine Tacon, can issue "recommendations" to supermarkets about their future conduct and "name and shame" those that have broken the code, the Department for Business, Innovation & Skills said.

However, some in the industry have been left disappointed the GCA had not been given the ability to fine offenders when the post was set up in 2013.

Business Secretary Vince Cable said the new power, if passed, would give the GCA "all the tools it needs to succeed".

Cable said: "This important final step will give the Groceries Code Adjudicator the power it needs to address the most serious disputes between the large supermarkets and their direct suppliers."

The GCA was formed to ensure compliance with the Groceries Supply Code of Practice (GSCOP), which was established in 2010 in response to concern over the unequal power relationship between the UK's major supermarkets - it covers the ten largest grocery chains in the country with turnover in excess of GBP1bn (US$1.5bn) - and their suppliers.

Complaints under the GSCOP had been rare, perhaps down anxiety on the part of suppliers.

In a survey by YouGov last summer announced by the GCA to mark the watchdog's first year, four in five suppliers to the UK grocery industry had reported "issues" in their dealings with the country's major food retailers to the adjudicator. Tacon said there had been "significant progress" in one of the top five issues suppliers had raised with her, with eight of the UK's ten largest food retailers have made voluntary commitments to put limits on forensic audits. The audits are a process in which accounts and records are analysed in detail for money that might be owed to the retailers. These audits can go back up to six years.

Transactions between suppliers and retailers were brought into sharp focus just weeks later when Tesco revealed it had over-stated profits by GBP250m due to it bringing commercial income forward and delaying payments to suppliers. Tacon has so far made no public comment on the issue and The Financial Times reported yesterday she was still considering whether to take any action.

News the Government is setting out plans to give Tacon the ability to impose fines will cheer some in the industry.

However, others believe the GCA's scope should be extended. At the moment, the GCA can only look into disputes between retailers and their direct suppliers. Last month, a committee of UK MPs, reporting on the impact on dairy farmers of volatility in milk prices, called for indirect suppliers to be covered.

And, of course, the issue of payment terms, for example, spreads further along the supply chain than between retailer and direct supplier, with companies including Premier Foods and 2 Sisters Food Group in the spotlight in recent weeks for how they pay their suppliers.

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