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Tesco facing further investigation by new regulator

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Written by:
05/02/2015
The Groceries Code Adjudicator (GCA), Britain’s national grocery industry watchdog, has launched an investigation into Tesco amid allegations the supermarket giant delayed payments to suppliers and unfairly handled payments for shelf promotions.

The GCA said it made the decision after considering information related to practices associated with Tesco’s first half profit over-statement.

The watchdog said the probe, which will cover the conduct of Tesco from 25 June 2013 to 5 February 5 2015, was expected to take place over the next six to nine months, and called for evidence to be submitted by 3 April.

“I have reasonable suspicion that Tesco breached the code in two areas,” Christine Tacon, GCA adjudicator, said. “One is reasonable payments and second is payments for better positions on shelf outside promotions.”

“I can legally require suppliers to give me the information I want for an investigation,” she continued. “In this case there is very much safety in numbers, and I frequently hear about the same issues from every sector in groceries. I’m just looking for a large amount of evidence and anonymity will be protected.”

The GCA investigation will investigate the following areas;

  • Short deliveries, including imposition of penalties
  • Consumer complaints where the amounts were not agreed
  • Invoicing discrepancies such as duplicate invoicing where two invoices were issued for the same product
  • Deductions for unknown or un-agreed items
  • Deductions for promotional fixed costs that were incorrect
  • Deductions in relation to historic promotions which had not been agreed

Tacon starkly underlined the penalties Tesco would face if found blameworthy. The GCA would “issue legally binding recommendations on their processes and how they should behave in future”, and “require them to name and shame – take out adverts in terms of what they have done.”

However, the prospective punishment Tesco could incur may be even more severe by the time the watchdog finishes their investigation; the Adjudicator is imminently due to be handed further powers to impose financial forfeits on large retailers (of up to 1 per cent of their annual UK turnover).

The new powers have been positively welcomed by Business Secretary Vince Cable, who stated the strengthened Regulator would have “real teeth” to deal with supermarkets “found guilty of mistreating suppliers.”

The GCA probe supplements concurrent ongoing investigations by the Serious Fraud Office and the Financial Reporting Council into Tesco’s accounting scandal, in which it overstated profit by £263m.

“We have worked closely with the office of the Adjudicator since its creation to put in place strong compliance processes,” a Tesco spokesman responded.

“An internal review we carried out and shared with the GCA identified some areas of concern. We have taken action to strengthen compliance and 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.”

 

 

 

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