Grocery Code Adjudicator identifies Tesco's "widespread and lengthy" delays in supplier payments

Grocery Code Adjudicator (GCA) Christine Tacon's long-awaited report has found Tesco guilty of delaying payments to suppliers, in breach of the legally binding Groceries Supply Code of Practice.

Image: GCA
Image: GCA

The investigation covered the period from 25 June 2013 to 5 February 2015 when it began, and looked at whether Tesco making unilateral deductions from suppliers, at the length of time taken to pay suppliers, and at whether there was an intentional delay in this.

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."

She says in her report: "I found that delay in payments was a widespread issue that affected a broad range of Tesco suppliers on a significant scale... Even in circumstances where a debt had been acknowledged by Tesco, on occasions the money was not repaid until over 12 months later with some amounts taking up to 24 months to be repaid."

Her report makes five recommendations:

  • Money owed to suppliers for goods supplied must be paid in accordance with the terms for payment agreed between Tesco and the supplier.
  • Tesco must not make unilateral deductions.
  • Data input errors identified by suppliers must be resolved promptly.
  • Tesco must provide transparency and clarity in its dealings with suppliers.
  • Tesco finance teams and buyers must be trained in the findings from this investigation.

The GCA has set a four-week deadline for Tesco to say how it plans to implement her recommendations. She will then require regular reports from the company on progress, including information on the number and value of invoices in dispute as well as the length of time they remain unresolved.

However she has no power to fine the retailer, as this only applies to breaches since April 2015.

The other strand of Tacon's investigation did not find Tesco in breach of the Code by directly requiring suppliers to make payments in order to secure better positioning or increased allocation of shelf space. However it did reveal practices that "may amount to indirect requirement" for such payments, on which she said she would investigate further.

She added: "I am pleased that many suppliers have reported improvements in their relationship with Tesco to me since the period under investigation. Tesco has also kept me informed of changes it is making to deal with the issues. This is a demonstration of the impact my role is making. I believe that my recommendations will lead to significant improvements at Tesco and in the sector."

Responding to the report, Tesco group chief executive officer Dave Lewis said: "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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