Watchdog announces Tesco probe - others may follow

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An official investigation is to be launched into practices at supermarket giant Tesco which could be extended to other major retailers.

The Groceries Code Adjudicator Christine Tacon said she had a “reasonable suspicion” that Tesco has breached the Groceries Supply Code of Practice (GSCOP).

At this stage the investigation will focus on Tesco plc only and will look into practices including delays in payments to suppliers.

However it could be extended to other supermarkets if evidence is presented to the GCA that the same practices have been carried out by other retailers.

Yesterday the boss of Leeds-based Asda said he was confident his company had stayed within the code of practice.

Andy Clarke, Asda chief executive, said: “Yes I’m confident we are okay. If she (Christine Tacon) expands the investigation into all retailers, that’s her choice. Of course we will co-operate.”

Asked if it was just Tesco that is affected, Mr Clarke said: “It’s certainly not in our business. Dave (Lewis, head of Tesco) is as shocked as anybody.”

Ms Tacon said she took the decision after considering information submitted to her relating to practices associated with the profit over-statement announced by Tesco last September.

She has discussed the practices with Tesco and said she now needs more information from direct suppliers to determine what action to take.

The role of the Adjudicator was set up in 2013 to regulate the relationship between the 10 largest retailers and their suppliers.

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.

It will consider the existence and extent of practices which have resulted in delay in payments to suppliers including deductions for promotional fixed costs that we incorrect, deductions for unknown/unagreed items and deductions for historic promotions which had not been agreed.

Ms Tacon said there was evidence that the practices were not isolated incidents and that each involved a number of suppliers and significant sums of money.

A Tesco spokesman said: “We have worked closely with the office of the adjudicator since its creation to put in place strong compliance processes.

“Following our announcement last September regarding commercial income, we have worked with her to identify any relevant GSCOP issues. 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.”

Business Secretary Vince Cable 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.”

Mark Johnson, of Warwick Business School, said Tesco cannot be fined, only investigated, adding: “I will be fascinated to see if Tesco can learn to deal with their supply base fairly after years of inequality and adversarial behaviour.”