A Groceries Code Adjudicator report has found that Tesco ‘seriously breached a legally-binding’ Groceries Supply Code of Practice. The report, which covered the period of 25th June 2013 to 5th February 2015, found that the supermarket retailer had ‘acted unreasonably’ when it delayed payments to suppliers, often for long periods of time.
“The length of the delays, their widespread nature and the range of Tesco’s unreasonable practices and behaviours towards suppliers concerned me,” said adjudicator Christine Tacon. “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.”
Tacon was concerned about the company making unilateral deductions from suppliers, the length of time taken to pay money due to suppliers and in some cases the intentional delay in paying suppliers.
Tesco has accepted the report’s conclusion and apologised.
“In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers,” said Dave Lewis, Group chief executive officer, Tesco. We shared these practices with the Adjudicator, and publicly apologised.
“Today, I would like to apologise again. We are sorry.”
He said that the company accepts the report’s findings and that they were consistent with Tesco’s own investigation.
Tacon also looked into whether or not the company had required suppliers to make payments to secure better shelf positioning or increased shelf space – but there was no evidence of this.
However, she did find practices that ‘could amount to an indirect requirement for better positioning’. This included large suppliers negotiating better positioning and increased shelf space in response to requests for investment from Tesco, and paying for category captaincy and to participate in Tesco range reviews.
“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.”
Tacon has ordered Tesco to make meaningful changes in the way it approaches the payment of its suppliers. It has been given a four-week deadline to explain how it plans to implement Tacon’s suggestions.
Tacon also said that she was pleased to reveal that many of Tesco’s suppliers have reported improvements in their relationship with the supermarket retailer. Tesco is also keeping her informed about changes being made to approach the issues found in the report.
Dave Lewis said: “We have made a lot of progress, but there is still more we can do. Today our colleagues are empowered to do the right thing for our customers and for our suppliers, and I am extremely proud of the way they have responded over the past year.”
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