Dive Brief:
- The Serious Fraud Office, Financial Reporting Council, and now Groceries Code Adjudicator have come together to investigate Tesco for potential supplier abuses and breaches of the groceries supply code of practice.
- Adjudicator Christine Tacon developed "reasonable suspicion" of abuses after reviewing a Deloitte internal report from Tesco and receiving information from other suppliers and trade associations. The Groceries Code Adjudicator will examine Tesco's profits and payment delays to suppliers to find if there are any traces of mistreatment.
- However, even if the investigation does turn up code breaches, Tacon will not be able to fine Tesco — or any other supermarket — for past offenses. The supermarket chain cannot be prosecuted for regulatory breaches committed before Tacon officially had the power to fine stores, which was just last week.
Dive Insight:
On-time payments to suppliers are crucial for them to stay in business. Without the money for goods sold to major retailers like Tesco, these suppliers could be put in serious financial trouble, which is why the grocery store watchdog is taking these matters so seriously. Tesco has already been in hot water with the Serious Fraud Office as of late for allegedly overstating profits, and its financial woes have apparently contributed to the future closing of several stores and other major changes.
In other relations with suppliers, Tesco is also removing up to 30% of more than 90,000 products from its shelves in an effort to make browsing and selection simpler for its customers. Two of its low-cost, low-choice competitors, Lidl and Aldi, which have been slowly leeching away business, carry fewer than 2,000 products. Did Tesco really need 228 brands of air freshener and 28 brands of ketchup to provide customers with a competitive selection in the first place?