Monday 21st Jan 2019 - Logistics & Supply Chain

Tesco faces investigation over treatment of suppliers

Groceries code adjudicator Christine Tacon has launched an investigation into Tesco’s behaviour towards suppliers. And this could be extended to other retailers if evidence of malpractice comes to light.

In September last year, Tacon called on the company to examine its behaviour towards suppliers as part of the internal review which it launched into its profit over-statement.

See story: Tesco under pressure to review behaviour towards suppliers

ChristineTaconTacon said she had “formed a reasonable suspicion that the retailer has breached the Groceries Supply Code of Practice” after considering information submitted to her relating to practices associated with the profit over-statement.

She said that she had discussed the practices with Tesco and now needed more information from direct suppliers and others to determine what further action to take.

The investigation is expected to take up to nine months. Tacon wants evidence to be submitted by 3rd April.

It will cover the conduct of Tesco plc from 25 June 2013 (when the GCA was created) to 5 February 2015 and focus two areas of the code.

It will examine practices which have resulted in delay in payments to suppliers, including:

* Short deliveries, including imposition of penalties

* Consumer complaints where the amounts were not agreed

* Invoicing discrepancies such as duplicate invoicing where two invoices were issued for the same product

* Deductions for unknown or un-agreed items

* Deductions for promotional fixed costs (gate fees) that were incorrect

* Deductions in relation to historic promotions which had not been agreed.

The investigation will also consider the existence and extent of practices where suppliers have been required to make payments for better shelf positioning which are not related to a promotion.

Although the investigation will focus on Tesco, Tacon has not ruled out extending it to other retailers if she find evidence of malpractice.

Christine Tacon said: “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.”

David Noble, group chief executive of the Chartered Institute of Procurement & Supply, welcomed the investigation but said it was overdue.

1163“Unchecked retailers have felt free to abuse their power for far too long and suppliers across the UK are owed billions of pounds in unpaid invoices.

“If there has indeed been wrong-doing by Tesco, the regulator must have the teeth to force change. But this remedial action is tantamount to closing the stable door once the horse has bolted. For too long the retail sector has felt able to operate according to its own norms and practices without regard for best practice in procurement and supply chain management. To really sort out this mess at source, there needs to be clear accountability and higher standards within the retail procurement industry as a whole.

“Regulatory action or no, if the UK’s retail supply chains are run without the right people in place and for the sole purpose of reducing costs and squeezing suppliers, it will only be a matter of time until the next scandal comes to light. We must take this opportunity to change course now.”

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