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Tesco breaches industry code of conduct

Member: Nifa

The Grocery Code Adjudicator found this week that Tesco “knowingly delayed paying money to suppliers in order to improve its own financial position”. Having analysed extensive evidence, Christine Tacon declared that the supermarket giant had “acted unreasonably” when delaying payments to suppliers.

The ombudsman’s investigation began in February last year when a ‘black hole’ of around £250 was found in the firm’s accounts, although this sum was later revised to £326m because of the way the supermarket booked income from its suppliers.

Ms Tacon said she had been sent a number of internal mails encouraging Tesco staff to seek agreement from suppliers to the deferral of payments due to them in order to help the firm’s margins. She also saw emails suggesting that payments should not be made to suppliers before a certain date in order to avoid underperformance against a forecasted margin.

The watchdog’s forensic investigation found one example involving a supplier who was owed a multi-million pound sum as a result of price changes being incorrectly applied to Tesco systems over a long period.

The investigation, which would have included a forensic accounting team, covered the period between June 2013 and February 2015 and Ms Tacon analysed accounts, records, emails and other documents, as is the norm in a forensic exercise. She looked specifically at the time Tesco took to pay suppliers, the matter of ‘unilateral deductions’ from suppliers and cases where there had been an intentional delay in paying them.

Commenting on the findings, Business Minister Anna Soubry said that Ms Tacon had conducted a “thorough and fearless” investigation into a “scandalous situation”. She added that Tesco now say they have changed their practices and hoped that that is indeed the case, as paying smaller suppliers on time and treating them fairly is “good and proper business practice”.

Author: Roger Isaacs, 1 February 2016

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