Tesco breaches supermarket code
Company delays payments and makes deductions
According to the BBC, Tesco "knowingly delayed paying money to suppliers in order to improve its own financial position", the supermarket ombudsman has found.
Groceries Code Adjudicator Christine Tacon has told Tesco to introduce significant changes to practices and systems after finding Britain’s largest supermarket seriously breached a legally-binding Groceries Supply Code of Practice (the Code) to protect groceries suppliers.
Photo credit: Flickr.
During a thorough investigation covering the period from 25 June 2013 to 5 February 2015 she found that the retailer had acted unreasonably when delaying payments to suppliers, often for lengthy periods of time.
The Adjudicator was concerned about three key issues:
- Tesco making unilateral deductions from suppliers
- The length of time taken to pay money due to suppliers
- In some cases an intentional delay in paying suppliers
She considered Tesco’s breach of the Code to be serious due to the varying and widespread nature of the delays in payment. The Adjudicator has used her powers to order the retailer to make significant changes in the way it deals with payments to suppliers.
Her five recommendations include stopping Tesco from making unilateral deductions from money owed for goods supplied. Suppliers will be given 30 days to challenge any proposed deduction and if challenged Tesco will not be entitled to make the deduction.
The Adjudicator also insists that the company corrects pricing errors within seven days of notification by a supplier.
Tesco has also been told to improve its invoices by providing more transparency and clarity for suppliers and to put its finance teams and buyers through training on the findings from the Adjudicator’s investigation.
Christine Tacon launched the GCA’s first investigation in February following the Tesco announcement on its profit over-statement and the receipt of information from the retailer and the sector. The information available to the Adjudicator gave her a reasonable suspicion that the retailer had breached areas of the Groceries Supply Code of Practice.
During the investigation she found delay in payments arising from data input errors, duplicate invoicing and deductions to maintain Tesco margin; and unilateral deductions resulting from forensic auditing, short deliveries and service level charges.
Tesco apologised for the practices, saying they had harmed its suppliers.
Tesco remains under investigation by the Serious Fraud Office (SFO) into alleged accounting irregularities.
See where Tesco ranks in our ethical shopping guide to supermarkets
This story has been added to our corporate database. The database powers all our live product guides, giving the score for each company on our rankings tables. Find out more about how we rate companies.