Wednesday 10 February 2016

The Groceries Code

Farmers are facing tough enough times without supermarkets exploiting their dominant position in the supply chain.

The Groceries Code Adjudicator (GCA), Christine Tacon has investigated Tesco and found it “seriously breached” the legally binding Groceries Code, as many suppliers have suspected for years.  

The Groceries Code sets out the rules on how supermarkets should treat suppliers and the GCA found that through various means Tesco had contrived to delay or reduce payments to suppliers to keep their profits up.  Such delays can put real cash flow pressure on small suppliers and it is absolutely outrageous that Tesco has been allowed to get away with this for so long. 

Tesco is now legally obliged to take action to implement the changes recommended by Tacon but because of the unaccountable delay in the government giving the GCA its full powers, Tesco cannot be fined for its breaches.  

If significant fines could be levied, supermarkets would think very carefully about how they treat their suppliers, especially when their own profits are under pressure.

Tesco are also under investigation by the Serious Fraud Office (SFO) because of their £326m overstatement of profits last year, much of which appears to be tied up with the manner in which money was accounted for in the supply chain. I assume that if found guilty, the SFO would have the power to raise a fine, unlike the GCA.

I understand that Tesco has already started to clean up its act which will be good news for their suppliers but it is very depressing that it has taken so long for unscrupulous trading practices to be brought under control, despite many suppliers complaining about their treatment for years.  

Whenever there is such a disparity in “power” between a buyer and supplier there is always a danger that the dominant party will exploit their position.  Unfortunately this is bad news for farmers because they very often find themselves in a weak bargaining position at the bottom of the supply chain.

The government needs to equip the GCA with full powers to fine organisations as soon as possible.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

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