An official investigation has been launched into supermarket giant Tesco’s supplier practices which have resulted in delayed payments, the Groceries Code Adjudicator says.
The Groceries Code Adjudicator (GCA), which is set to be handed new powers to impose penalties on large retailers of up to 1 per cent of their annual UK turnover, said it had made the decision after considering information related to practices associated with Tesco’s first half profit over-statement.
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The investigation, the first to be held, is expected to take up to nine months and the Adjudicator has called for evidence to be submitted by April 3.
Christine Tacon, from the watchdog, said: “The investigation will consider the existence and extent of practices which have resulted in delay in payments to suppliers.” It added it would also consider the existence of practices where suppliers have had to pay for better positioning of goods on Tesco‘s shelves which are not related to a promotion.
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Ms Tacon added: “This is the first investigation I have launched and it is a significant step for the GCA.
“I have taken this decision after careful consideration of all the information submitted to me so far.
“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.”
The role of the Adjudicator was set up in 2013 to regulate the relationship between the 10 largest retailers and their suppliers.
A Tesco spokesman said that it would fully co-operate with the watchdog, adding that it was changing the way it was working with suppliers. In a statement, the spokesman said: “An internal review we carried out and shared with the GCA identified some areas of concern.
“We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with suppliers.
“We will continue to co-operate fully with the GCA as she carries out her investigation and welcome the opportunity for our suppliers to provide direct feedback.”
We have created a regulator that has real teeth. Vince Cable
Following the announcement, Business Secretary Vince Cable urged people to report any evidence of wrongdoing. He said: “This is an historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth.
“Last week I secured the final agreement in government to proceed with legislation to enable the regulator to impose hefty fines for those supermarkets found guilty of mistreating suppliers.
“Now that a formal investigation has been launched, I would encourage anyone with any evidence of wrongdoing to come forward and to be confident of being able to do so confidentially as their anonymity will be protected by law.”