Groceries Code Adjudicator uncovers serious breaches by Tesco

Groceries Code Adjudicator uncovers serious breaches by Tesco

The Groceries Code Adjudicator (the GCA) has concluded her first ever formal investigation, finding that Tesco seriously breached the Groceries Supply Code of Practice by failing to pay suppliers within a reasonable time. The report on her investigation has been published this week.

Helen Hart, solicitor in the Lexis®PSL Commercial team, provides a useful overview of the investigation below:

What was the background to the investigation?

On 22 September 2014, Tesco released the following trading update statement confirming that it had:

identified an over-statement of its expected profit for the half-year, principally due to the accelerated recognition of commercial income and delayed accrual of costs...the Board believes that the guidance issued on 29 August 2014 for the Group profits for the six months to 23 August 2014 was overstated by an estimated £250m.

As a result, the GCA launched an investigation in early 2015 into some of the practices associated with the profit over-statement.

After considering information submitted, the GCA held a reasonable suspicion that Tesco had breached the Groceries Supply Code of Practice regarding delayed payments and requests for payments for better positioning of goods. The investigation covered the period from 25 June 2013 to 5 February 2015.

What has the GCA found? 

The GCA issued her report on 26 January 2016, finding that Tesco had seriously breached the Code.

She considered Tesco’s breaches of the Code to be serious due to the varying and widespread nature of the delays in payment. During the investigation she found that the retailer had acted unreasonably when delaying payments to suppliers, often for lengthy periods of time. She also found delay in payments arising from data input errors, duplicate invoicing, deductions to maintain Tesco margin an

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