Secure a contract to supply Tesco and you might think your company is quids in, but the Groceries Code Adjudicator has revealed grave concerns with the terms and conditions Tesco suppliers have been expected to operate under in recent years.
Following an investigation, the GCA has published a lengthy report detailing multiple breaches by Tesco of the Groceries Supply Code of Practice – which, unlike the Prompt Payment Code for instance, is legally binding on those who sign up to it.
As such, the ongoing breaches found in the period from June 25th 2013 to February 5th 2015 are a serious cause for concern, as well as being extremely troublesome for the affected suppliers.
Three of the main issues raised are:
- Tesco were seen to make unilateral deductions from their payments to suppliers.
- Tesco were seen to take too long to pay suppliers.
- Tesco were seen to intentionally delay supplier payments in some instances.
Groceries Code Adjudicator Christine Tacon said: “The length of the delays, their widespread nature and the range of Tesco’s unreasonable practices and behaviours towards suppliers concerned me. I was also troubled to see Tesco at times prioritising its own finances over treating suppliers fairly.”
She added: “Many suppliers have reported improvements in their relationship with Tesco to me since the period under investigation. Tesco has also kept me informed of changes it is making to deal with the issues.”
To put the problem into further context, Ms Tacon’s investigation found:
- payment delays due to data entry errors, duplicate invoices, and deductions to maintain Tesco’s margin.
- unilateral deductions arising from forensic auditing, short deliveries and service level charges.
One supplier was owed millions of pounds by Tesco due to an error in applying price changes on Tesco’s system – it took over two years for this to be paid back.
Among the most serious implications of her review, Ms Tacon has notified the Competitions and Markets Authority that not all of the terms and conditions Tesco placed on its suppliers may have been in writing.
If this is the case, it is a breach of CMA rules, and is likely to be one of the contributing factors in delaying payments and creating disputes.
The case as a whole demonstrates the importance of written terms and conditions that are mutually agreed and enforced – and of not trying to enforce rules that were not agreed in writing upfront.