Tesco hits spotlight again over supply chain practices

The grocery chain Tesco, Britain’s biggest retailer, is being investigated by its trade watchdog over claims of unethical bullying treatment of suppliers, including late payment.

However, the company will escape financial penalties if found to be at fault. The worst it can suffer is a damning report, though this would add to the reputational damage being inflicted by an existing fraud probe.

The Groceries Supply Code of Practice (GSCOP) began examining Tesco’s relationship with its suppliers after the company overstated its profits late last year.

It will consider allegations of penalties imposed for short deliveries, duplicate invoicing and exorbitant fees for prominent product placement, as well as delayed bill settlement.

Christine Tacon, the GSCOP adjudicator, said she had “reasonable suspicion” that Tesco had breached the code.

The Tesco investigation, the first initiated by the GSCOP since its introduction in 2013, could take nine months. Tacon has asked for all evidence to be submitted by 3 April.

The legislation includes powers to fine offenders up to 1 per cent of turnover, but this part of the law has not yet been implemented. Consequently, no fines will be imposed on Tesco if the case is proved.

A Tesco statement says the company has acted to strengthen compliance with the rules and is changing the way it works with suppliers.

After lobbying by small business bodies, the GSCOP may widen its inquiry to cover other large supermarket chains if complaints are submitted.

A Serious Fraud Office criminal investigation into Tesco’s accounts started after the company overstated its profits for the first half of last year by £263m ($404m, €354m).

As a result of the profits announcement chief executive Philip Clarke and chief financial officer Laurie McIlwee, on whose watch the statement was made, left the company. Tesco said then that severance settlements to the two men would be suspended while the inquiry was held.