The ‘big 5’ recommendations for Tesco by GCA should be taken as standard for all retailers

The Grocery Code Adjudicator (GCA) yesterday published their report that found Tesco had ‘seriously breached’ the Groceries Supply Code of Practice in its’ trading period 25 June 2013 to 5 February 2015.

Criticisms of Tesco included unilateral deductions to suppliers, the length of delays in payment, sometimes intentional, and prioritising their own finances over treating suppliers fairly.

The five key recommendations to Tesco may be summarised as follows:

1. Money owed to suppliers must be paid in line with payment terms;
2. Tesco must not make unilateral deductions;
3. Data input errors identified by suppliers must be resolved promptly;
4. Tesco must provide transparency and clarity in its dealings with suppliers;
5. Tesco finance team and buyers must be trained in the findings from the investigation.

Tesco has four weeks to report back on how it plans to implement the recommendations. The retailer will then have to give regular reports on its progress, including information on the number and value of invoices in dispute.

The Adjudicator was only given real teeth to impose a financial penalty for breaches occurring on or after 6 April 2015 therefore outside the time period under investigation. It now has the power to fine retailers up to 1% of turnover.

Perhaps unsurprisingly therefore, since the period under investigation, ‘many suppliers’ had reported improvements in their relationship with Tesco. Additionally, Tesco has since been the first UK retailer to publish its payment terms with suppliers and has set up a helpline for suppliers to solve any issues which might arise within 48 hours. It is stated by Tesco Group CEO Dave Lewis that teams have been reorganised, refocused and retrained to work in a way which is consistent with the GCA recommendations.

It is hoped that all retailers take this opportunity to review their practices and supply chains in light of these recommendations.

Also announced yesterday by GCA Christine Tacon was a formal consultation with retailers and suppliers to decide if practices of negotiating better positioning or increased shelf space by large suppliers in response to requests for investment, as well as paying for category captaincy to participate in range reviews, were acceptable or if these may circumvent the purpose of the Code to the detriment of smaller suppliers.