A Tesco chain supermarket. (Photo: Mankind 2k/CC BY 3.0)

Tesco accused of delaying payments to suppliers to improve its financial position

A British regulatory body has ordered Tesco to introduce significant changes to practices and systems after finding it withheld money owed to suppliers to increase sales performance and improve its financial situation.

An investigation carried out by Groceries Code Adjudicator (GCA), Christine Tacon, discovered that the largest supermarket chain in the UK made unilateral deductions from suppliers, delayed the length of time taken to pay money due to suppliers and in some cases, slowed down the payments intentionally.

In reference to the nature and extent of breaches to the Groceries Supply Code of Practice, Tacon said, “The most shocking thing I found was how widespread it was and that it was in every sector and every supplier I spoke to had evidence in delays in payments.”

"A Tesco list of methods for meeting the half-year target included 'Not paying back money owed',” she added.

The Adjudicator recommended giving suppliers 30 days to challenge any proposed deduction and if challenged Tesco will not be entitled to make the deduction.

She also insisted that the company must correct pricing errors within seven days of notification by a supplier.

Tacon launched the GCA’s first investigation in February following Tesco announcement on its profit over-statement and the receipt of information from the retailer and the sector. The information that the agency had led to the suspicion that the supermarket chain had violated certain provisions of the sector's code of practice.

The adjudicator has also asked the Competition and Markets Authority (CMA) to consider the issue of category captaincy as well as referring evidence that Tesco may have breached CMA rules by operating without all its terms of supply agreement being in writing – a factor that may have contributed to payment disputes and delays.

Tesco's chief executive Dave Lewis said that the supermarket had changed the way it works and would abide by GCA's recommendations.

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Address:	New Tesco House, Delamare Road
City:	Cheshunt
State/ZIP:	Hertfordshire, England (EN8 9SL)
Country:	United Kingdom
Phone:	+44 1992 632 222
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