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Report: Tesco acted "unreasonably" to suppliers

A report by the Grocery Code Adjudicator, Christine Tacon - effectively the supermarket ombudsman - says that Tesco "knowingly delayed paying money to suppliers in order to improve its own financial position".

Tacon said the supermarket seriously breached the industry's code of conduct to protect grocery suppliers, having found extensive evidence that Tesco had acted unreasonably when delaying payments to suppliers.

"I received internal Tesco emails which encouraged Tesco staff to seek agreement from suppliers to the deferral of payments due to them in order to temporarily help Tesco margins," said Tacon. "I also saw internal Tesco emails suggesting that payments should not be made to suppliers before a certain date in order to avoid underperformance against a forecasted margin."

Tesco has accepted the report's findings, and says it will continue to work collaboratively with suppliers to further build trust.

Dave Lewis, its Group Chief Executive Officer, 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.

“I am grateful to the Adjudicator for the professional manner in which the investigation has been conducted. We accept the report’s findings, which are consistent with our own investigation.

“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed.

“In January 2015, we made material changes to our business that addressed the majority of the historic practices referred to in the report. 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."

The report was commissioned following the discovery of a £326m 'black hole' in the company's accounts which was said to have arisen because of the way Tesco booked income from its suppliers.

Although Tacon doesn't have the power to fine Tesco, she has set a four-week deadline for the company to respond to five recommendations made in the report.

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