ISSUES
: Business and Trade
Chapter 2: Corporate responsibility
28
Tacon found buyers were given
“contradictory
and
unclear”
guidance about the importance
of hitting margin targets. Some
delays were the result of poor
administration and communication
and Tesco had “inadequate
processes” for correcting errors,
for example where data had been
input wrongly.
She has given the retailer a month
to say how it plans to implement her
recommendations, which include
paying suppliers in accordance
with agreed terms, correcting
pricing errors within a week of
notification by a supplier and calling
a halt to unilateral deductions from
invoices. Suppliers will now have
30 days to challenge any proposed
deduction.
The adjudicator also said Tesco
must improve its invoices, making
them clearer and more transparent
for suppliers, and train its finance
teams and buyers. She said many
of the problems encountered
related to unclear terms in Tesco’s
agreements with suppliers and
deals not being put into writing –
something she has referred to the
competition watchdog, the CMA.
Tacon said many suppliers had
reported an improvement in
relations with Tesco since the
period under investigation, June
2013 until February 2015.
She said she had found no evidence
that Tesco had required suppliers
to make payments to secure better
shelf positioning or to increase the
amount of space allocated to them
on shelves.
However, she will now launch
an industry-wide consultation
examining payments made by
suppliers in order to participate
when Tesco reviewed the range of
products stocked in a particular
category or in order to be made
a “category captain”, where they
could advise on how best to display
products. Tesco also asked for
“investment” from suppliers to
help underpin profits in a particular
category.
Tacon
said
such
payments could amount to tens
or even hundreds of thousands of
pounds per supplier.
Tacon said: “There were a range
of practices that I am concerned
could amount to an indirect
requirement for payment [related to
positioning of products on shelves],
contravening the code.”
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.”
“We accept the report’s findings,
which are consistent with our own
investigation.”
He said Tesco had already
implemented
all
the
recommendations of the GCA
and had completely changed its
practices since January 2015. He
said Tesco had also stopped asking
for payments related to “category
captain” status or range reviews,
but the company would look at
making further changes in the light
of Tacon’s planned consultation.
“We have changed the way we
work by reorganising, refocusing
and retraining our teams and
we will continue to work in a
way which is consistent with the
recommendations,” Lewis said.
While Tesco could not be fined, it
could have been required to take
out newspaper advertisements
laying out its apology. Tacon said
she had not used this power as
Lewis had publicly apologised and
Tesco’s suppliers gave evidence
that dealings had now improved.
The supermarket must now
report quarterly to the GCA on
the measures she has asked it to
introduce and Tacon can launch a
new investigation if she finds her
recommendations have not been
followed through.
Anna Soubry, the business minister,
said: “Christine Tacon has done a
thorough and fearless investigation
into a scandalous situation. Tesco
say they have changed their
practices and I very much hope
they have. Paying smaller suppliers
on time and treating them fairly is
good and proper business. Late
payment can hinder the growth and
productivity of these suppliers and
can threaten their existence.”
26 January 2016
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The above information is
reprinted with kind permission
from
The Guardian.
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