Tesco under investgation for alleged Groceries Code breaches

Tesco is to be investigated following “reasonable suspicion” that the retailer breached the Groceries Supply Code of Practice.

The Groceries Code Adjudicator (GCA), Christine Tacon, announced she will launch an investigation into the retailer after information submitted relating to the practices associated with the £250m overstatement of profits Tesco made in September 2014.

The GCA will join the Serious Fraud Office and the Financial Reporting Council in investigating the supermarket chain.

Tacon told the Scottish Parliament this morning she is encouraging suppliers to come forward and talk to her about their relationship with the retailers. Evidence must be submitted by 3 April 2015.

The investigation will cover the conduct of Tesco PLC from 25 June 2013 (when the GCA was created) to 5 February 2015 and focus on Part 4 (paragraph 5) of the code: No delay in payments, and Part 5 (paragraph 12) of the code: No payments for better positioning of goods unless in relation to promotions.

Christine Tacon said: “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.”

"Historic day"

Business secretary Vince Cable introduced legislation that would allow regulators to impose hefty fines on retailers that were found “guilty of misleading their suppliers”. These fines could total 1% of their total turnover.

Following the annoucement today Cable said: “This is an historic day for the Groceries Code Adjudicator and shows we have created a regulator that has real teeth.”

However, Tacon told the BBC that despite this legislation she could not fine Tesco, as any offences she was looking at would have been committed before she was given the power to do so.

Seeking advice

Tracy Ewen, managing director of IGF Invoice Finance, a financial advisory service, said frms supplying Tesco should seek financial advice: “If nothing changes we may see small companies fold immediately.

“For those firms mired in long payment terms, there are options available that cover the gap between work completed and money in the bank. It’s therefore important for firms to thoroughly review their options and make use of any free financial advice that their own financial partners and suppliers can offer before pressure from large customers impacts their growth or operations.”

If you have been affected by this story, contact MTJ on eleanor.mackay@wrbm.com.

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