Tesco told to make “significant changes” in dealing with its suppliers

Tesco has been told by the Groceries Code Adjudicator (GCA) Christine Tacon to introduce “significant changes” to its practices and systems after finding the supermarket had seriously breached a legally-binding Groceries Supply Code of Practice to protect groceries suppliers.

During an investigation covering the period from June 25, 2013, to February 5, 2015, she found that the retailer had acted unreasonably when delaying payments to suppliers, often for lengthy periods of time.

Ms Tacon (pictured above) listed concerns about three key issues:

  • Tesco making unilateral deductions from suppliers,
  • the length of time taken to pay money due to suppliers, and
  • in some cases an intentional delay in paying suppliers.

She has duly ordered the retailer to make significant changes in the way it deals with payments to suppliers. Her recommendations include:

  • stopping Tesco from making unilateral deductions from money owed for goods supplied;
  • suppliers to be given 30 days to challenge any proposed deduction and, if challenged, Tesco will not be entitled to make the deduction;
  • 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.

Accepting the findings on behalf of Tesco, Group Chief Executive Officer, Dave Lewis, said: “In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the Adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry.

“I am grateful to the Adjudicator for the professional manner in which the investigation has been conducted. We accept the report’s findings, which are consistent with our own investigation.

“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed.”

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