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Groceries Code Adjudicator's investigation finds Tesco 'seriously breached' Code

Published:  26 January, 2016

Following an in-depth investigation Christine Tacon, the Groceries Code Adjudicator has told Tesco to introduce "significant changes to practices and systems after finding Britain's largest supermarket seriously breached a legally-binding Code to protect groceries suppliers."

The report stated that Tesco made unilateral deductions from suppliers, the length of time it took for the retailer to pay its suppliers and in some case 'intentional' delay of payment to suppliers were key issues of concern.

"I find that Tesco knowingly delayed paying money to suppliers in order to improve its own financial position. Any delay in payment deliberately caused by a retailer is unreasonable," according to the report that Tacon published.  

Christine TaconChristine Tacon

The statement comes from the GCA following an investigation covering the period of 25 June 2013 to 5 February 2015.

Further the frequency that the invoicing and delaying in payments was far beyond what is deemed reasonable. Tacon found in the report  "that the frequency and scale of the issues identified go beyond what I consider to be an acceptable level of errors and resulted in business practices which were unfair."

The GCA also found that Tesco double invoiced suppliers and took too long to rectify the error.  She stated in the report:  "I find that there were instances when Tesco issued duplicate invoices to suppliers and failed to rectify these errors and pay the money owed to suppliers as a result of these errors within a reasonable time."

The margin payments that many suppliers were forced to make to maintain Tesco's "unachieved aspirational' targets were in some case over £1m. Tacon said in her findings: "I have received evidence that a number of suppliers made margin payments to Tesco of over £1 million."

Tacon found the UK's largest retailer acted "unreseaonably when delaying payments to suppliers, often for lengthy periods of time."  

The Groceries Code Adjudicator's finding were published today in a 60 page report called Investigation into Tesco Plc.

In the report Tacon states: "My findings are made in the context of the specific regulatory requirements of the Act. I have made no findings as to whether a criminal offence has been committed. The Serious Fraud Office's investigation may result in the institution of criminal proceedings."

An area of further concern for Tacon was the idea that suppliers had paid large sums of money to be the category captain. In some cases millions of pounds to be the supplier that helped oversee the category within Tesco.

In the report Tacon stated: "I am concerned that practices in relation to category management and captaincy have evolved since these reports were produced. It is not apparent from the Competition Commission reports that it was considering category management or captaincy arrangements in which large lump sums of money had been paid by the supplier. The evidence that I have seen during my investigation leads me to believe that payment for category captaincy may now be common practice at Tesco. In my view this is a potentially significant development. If large sums are being paid by suppliers to Tesco for category captaincy it suggests that the supplier must believe that it is obtaining significant financial benefits for its business from the arrangement."

The GCA set out five recommendation to Tesco including allowing Tesco to unilaterally take deductions off money owed to suppliers, to correct pricing errors within seven days and to improve invoicing.

The Serious Fraud Office and the Financial Conduct Authority are conducting investigations outside of what the GCA has been investigating.

View the whole reports in its entirety click here.