Retail watchdog calls out Tesco for its treatment of suppliers

Published on
January 28, 2016

Tesco was called upon by a grocery market watchdog to enact “significant changes” to the way it treats its suppliers after a year-long investigation allegedly found that the major retailer was deliberately delaying payments to support its profits.

The Grocery Code Adjudicator (GCA), the watchdog group that conducted the investigation, accused Tesco of paying its suppliers severely behind schedule – in one case, up to two years belated – thus breaching the code governing the grocery market.

“I was troubled to see Tesco at times prioritizing its own finances over treating suppliers fairly,” said Christine Tacon, the groceries code adjudicator, to The Guardian.

Tacon found internal emails that suggested payments be delayed until after a certain date as a means to satisfy margin targets as promised to City investors, sometimes with supplier consent and sometimes without it.

“The pressure on buyers and finance teams to meet margin targets was the overriding pressure within the business. It was widespread. It was everywhere,” Tacon explained to The Guardian.

Tacon added: “The most shocking thing I found was how widespread it was. How many instances in every sector. Every supplier I spoke to had evidence of delays in payments.”

GCA launched its investigation of Tesco back in February 2014, following an admittance by the retailer that it had overstated profits. According to Dave Lewis, Tesco’s chief executive – who came on board with the retailer in September 2014 after word of the scandal came to light – issued an apology to Tesco suppliers and assured that the company has “fundamentally changed.”

“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin [under former boss Phil Clarke] had damaging consequences for the business and our relationship with suppliers,” Lewis said, as reported by The Guardian.

Tesco has a month to implement or challenge Tacon’s and GCA’s recommendations. Tesco should correct pricing errors, pay suppliers in accordance to agreed upon terms and halt unilateral deductions from invoices, advised Tacon.

Many suppliers, according to Tacon, have reported enhancements in their relationships with the retailer over the course of her investigation, which considered the timeframe between June 2013 to February 2015.

“In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry,” reiterated Lewis.

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