Supermarket ombudsman launches formal consultation into payments for better positioning

By Jo Gilbert

Published: 27 June, 2016

The government official appointed to regulate and field complaints from suppliers working with the grocery industry has revealed that she is launching a formal consultation into the practice of supermarkets accepting payments for better positioning or increased share of shelf space.

Groceries Code Adjudicator (GCA) Christine Tacon, announced that the consultation will run for 12 weeks to September 19 and the responses will help her clarify how paragraph 12 of the Code relating to payments for better positioning should be interpreted.

Issues came to light during a public investigation launched into Tesco last year.

"During my Tesco investigation I came across instances where a Tesco request for investment resulted in the supplier asking for share of shelf space commitments, product placement near competitors and exclusivity," Tacon said.

"I also saw examples of significant payments for category captaincy and range reviews where suppliers felt that if they didn't pay they would be adversely affected in terms of positioning on shelf.

"Such arrangements appear to have the potential to have an adverse effect on competition through retailer acceptance of large sums of money from suppliers in exchange for better positioning or increased shelf space."

The announcement came at the GCA's third annual conference at Church House in London this morning, where Tacon identified payments for better positioning of goods as one the Top 5 issues on the new annual list which will be the focus of her work in the coming year.

The new list of Top 5 issues is: charges for artwork and design services, delay in payments, margin maintenance, pay to stay arrangements and payments for better positioning.

According to a YouGov survey carried out on behalf of the GCA, the top issues experienced by suppliers are incorrect deductions from invoices with or without notice topped the list at 30%, followed by excessive retailer charges for artwork/design (28%) and no compensation/incurring penalty charges for inaccurate forecasting (22%).

However, overall Tacon said that the UK's top ten supermarkets have all acted on issues raised by the Groceries Code Adjudicator (GCA) and that a sector-wide survey showed a further fall in the number of suppliers experiencing Groceries Code-related issues.

The YouGov survey found that 62% of direct suppliers said they had experienced an issue in the past year - compared to 70% in 2015 and 79% in 2014.

Suppliers rated Aldi, Sainsbury's and Lidl as the top three supermarkets in terms of complying 'consistently well' and 'mostly' with the Code during the previous 12 months.

Following Tacon's findings back in January that Britain's largest supermarket had "seriously breached a legally-binding Code to protect groceries suppliers", after it knowingly delayed paying money to suppliers, Tesco emerged from YouGov's survey as the retailer who had most improved its behaviour over the past year.

65% of those supplying the retailer saying its practices had improved and only 5% reporting they had worsened.

"All the regulated retailers have acted on the issues I have raised over the past year and there have been some excellent examples of changes in retailer practice," said Tacon.

"I am delighted that direct suppliers are seeing the impact of real change for their businesses. For the second year running the number of suppliers reporting Code-related issues has fallen."

One area of disappointment for the Adjudicator however, was the lack of change in the proportion of suppliers prepared to bring information to the GCA.

Tacon said: "I am disappointed that the number of suppliers saying they would bring an issue to me remains stubbornly on 47%, with more than half giving the reason as fear of their relations with a retailer being damaged.

"This is despite the publicity around the Tesco investigation and a clear demonstration that I can carry out a complex investigation with significant findings and benefits for suppliers with no identities revealed.

"In the coming year I will be redoubling my efforts to overcome this fear factor and also to reach suppliers overseas where knowledge of the GCA remains low."

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