In this alert we sum up various developments relating to the UK's Groceries Supply Code of Practice (GSCOP) over the last few months - including the Groceries Code adjudicator's report into Tesco.
The Groceries Code Adjudicator issued her findings on the Tesco investigation at the end of January.
Was Tesco in breach of GSCOP?
Yes. The key findings are:
The report authoritatively lifted the lid on practices that will be familiar to many supermarket suppliers which causes delay to payments - unilateral deductions, delayed payments, invoicing errors. Examples in the report refer to multi million pound sums withheld from suppliers for more than two years. There is no surprise at those practices, but the adjudicator has authoritatively identified that they do occur. The adjudicator found that Tesco was in serious breach of GSCOP. The adjudicator has made it clear that a unilateral deduction by a supermarket from a supplier's invoice will, if made unreasonably, be a breach of GSCOP Paragraph 5 which prohibits delayed payments. This is important as a supermarket's purchase terms will usually allow unilateral deductions (or set off). Therefore, in this area GSCOP does have the effect of curtailing the supermarket's contractual rights. GSCOP prohibits payments for better positioning of goods except in relation to promotions (paragraph 12). The adjudicator found that there was no evidence of a breach by Tesco of this requirement. However, the adjudicator has identified that Tesco had engaged in other practices which might have the impact of amounting to an indirect requirement for shelf space - eg category captaincy and range review participation. The adjudicator is going to review and consult further before making a determination. Has Tesco been fined?
No. Tesco were not at risk of a fine as the investigation covered a period when the adjudicator had not been given power to fine. There is no hint in the report as to whether Tesco would have been fined if the adjudicator had had the power.
Does that mean Tesco got away with it?
No. The adjudicator has made a series of recommendations that Tesco is required to follow:
Tesco must pay suppliers in accordance with contractual payments terms Tesco must not make unilateral deductions Suppliers must be given at least 30 days to challenge any proposed deduction If a deduction is challenged Tesco cannot deduct until resolved Data input errors identified by suppliers must be resolved promptly...