Investigation finds Tesco UK ‘intentionally’ delayed payments to suppliers
The UK’s new 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.
During a thorough investigation 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.
Adjudicator Ms Tacon said the length of the delays, their widespread nature and the range of Tesco’s unreasonable practices and behaviours towards suppliers concerned me. I was also troubled to see Tesco at times prioritising its own finances over treating suppliers fairly.
‘Similar independent ombudsman is needed in Ireland’
IFA National Chairman, Jer Bergin said today’s findings confirm that a similar independent ombudsman is needed in Ireland to regulate the grocery retail market.
IFA has been campaigning for an Independent Retail Ombudsman for some time and it is a key demand in our General Election 2016 Manifesto.
Jer Bergin said in Ireland and at EU level, there is a major imbalance of power in the food supply chain between retailers on the one hand and processors, suppliers and primary producers on the other.
“The small number of large retailers clearly have excessive buying power and the ability to dictate prices levels back to farmers, often driving prices to uneconomic levels and even below the cost of production.
“While the Competition and Consumer Protection Act 2014 has begun to address the issue of retailer regulation, the Grocery Code Regulations have yet to be published.
“These will provide some contractual guarantees between producers and retailers, however the UK experience shows that a strong, Independent Retail Ombudsman is needed to deal firmly with retailer multinationals.”