Tesco ‘put profit ahead of suppliers’
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TESCO, Britain’s biggest supermarket group, “seriously breached” a legally binding code to protect suppliers in order to prop up its own finances as it battled an industry slowdown, the country’s grocery watchdog ruled yesterday.
The Groceries Code Adjudicator (GCA), Christine Tacon, launched an investigation into Tesco last February in the wake of the firm’s 263-million-pound (US$373 million) profit over-statement, revealed in September 2014.
A separate investigation by the UK’s Serious Fraud Office is also ongoing.
“The length of the delays, their widespread nature and the range of Tesco’s unreasonable practices and behaviors towards suppliers concerned me,” Tacon said, issuing a series of recommendations to Britain’s biggest retailer.
“I was also troubled to see Tesco at times prioritizing its own finances over treating suppliers fairly,” she said.
The accounting scandal, which contributed to one of the biggest annual financial losses in British corporate history, led to the departure of several top Tesco executives and plunged the company into a crisis it is still to fully recover from.
Tesco yesterday said it accepted the findings of the report and would continue to work with suppliers to build trust after working hard over the past year to change the business.
“I would like to apologize again. We are sorry,” said Tesco’s Chief Executive Dave Lewis in a statement.
“We have changed the way we work by reorganizing, refocusing and retraining our teams, and we will continue to work in a way which is consistent with the recommendations,” he said.
Tacon found Tesco acted unreasonably by delaying payments to suppliers, often for lengthy periods of time, and has told the group to introduce significant changes to its practices.
She expressed concern about three key issues: unilateral deductions from suppliers, the length of time taken to pay money due to suppliers, and in some cases an intentional delay in paying suppliers.
Tesco’s breach of the Code was serious because of the varying and widespread nature of the delays in payment, she said.
The GCA has recently been given powers to fine supermarkets, but they came too late for the Tesco case.
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