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Tesco probe a boon for suppliers

By Donald C McFetridge

Published 28/01/2016

It seems to be swings and roundabouts for the top executives at Tesco these days
It seems to be swings and roundabouts for the top executives at Tesco these days

It seems to be swings and roundabouts for the top executives at Tesco these days.

After posting strong trading figures for the Christmas 2015 period, along with improved levels of customer satisfaction and growth of 4.1% in their international markets, they have been struck another blow as a result of the findings of the Groceries Code Adjudicator.

In February 2015, the GCA (the supermarket watchdog) began a very detailed investigation into whether or not Tesco was in breach of the legally-binding code which protects supermarket suppliers.

The adjudicator was primarily concerned about three key issues:

  • whether or not Tesco had been making unilateral deductions from suppliers;
  • the length of time taken to pay monies due to suppliers; and, in some cases
  • allegations of intentionally delaying payments to suppliers.

This week, the findings have been published and it has been pointed out that Tesco has, in fact, acted "unreasonably" in respect of delaying payments to suppliers, often for lengthy periods of times.

As a result of this, Christine Tacon, the adjudicator, has made five key recommendations which, among other things, include stopping Tesco from making unilateral deductions from money owed for goods supplied, whereby suppliers will be given 30 days to challenge any proposed deduction and, if challenged, Tesco will not be entitled to make the deduction.

Initially, Tesco has publicly responded by apologising to suppliers affected and stated that it is now a very different company from what it was when the investigation started. Officially, the company now has four weeks in which to clarify how they plan to implement the adjudicator's recommendations.

This all spells good news for suppliers, particularly those operating on a small scale who need to be paid promptly in order to stay in business. However, it provides little comfort for those who have historically suffered at the hands of the supermarket giant in a retail marketplace where Tesco is struggling, not for survival, but for total control.

  • Donald C McFetridge is a retail analyst at Ulster University Business School

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