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Tesco Rapped By Grocery Regulator Over Treatment Of Suppliers

Published on Jan 26 2016 11:16 AM in Retail tagged: Featured Post / UK / Tesco / Groceries Code Adjudicator

Tesco Rapped By Grocery Regulator Over Treatment Of Suppliers

Tesco plc received a rap over the knuckles from the UK grocery regulator, which said Britain’s largest supermarket chain prioritized its own finances over treating suppliers fairly in a breach of an industry code.

Tesco delayed significant payments to suppliers on a widespread basis and made unilateral deductions to the money it owed for goods already received, the Groceries Code Adjudicator said in a report on Tuesday. The retailer issued a statement apologizing, saying it accepts the rebuke and will work to rebuild trust with manufacturers.

The findings conclude an 11-month investigation prompted by Tesco’s admission that it overstated profit by £326 million ($464.6 million.) The GCA investigated whether Tesco’s delaying of payments to suppliers violated industry rules and if the UK’s largest retailer demanded suppliers pay to receive preferential product placement in stores.

The GCA has recommended Tesco cease making unilateral deductions in supplier payments, correct pricing errors within seven days of being notified by a supplier and make invoices more transparent.

Faster Payments

“My recommendations will deal with the weaknesses in Tesco’s practices,” regulator Christine Tacon said in the report.

While the GCA doesn’t have the ability to fine Tesco, more serious punishment could be handed down by the Serious Fraud Office, which is investigating Tesco’s accounting at a criminal level. Mike Dennis, an analyst with Cantor Fitzgerald, estimates that the SFO could fine Tesco more than £350 million and also demand the company repays hundreds of millions of pounds to suppliers.

Tesco has already pre-empted some of the GCA’s recommendations. In October, the company established a new policy that guarantees suppliers are paid faster.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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