Tesco Breached Code on Payment Delays
26 Januar 2016 - 12:40PM
Dow Jones News
LONDON—Tesco PLC unreasonably delayed payments to suppliers and
must "make significant changes," a U.K. regulator said on Tuesday
following a year-long investigation into the supermarket chain's
payments practices.
The Groceries Code Adjudicator Christine Tacon said Tesco
"seriously breached" the Groceries Supply Code of Practice, aimed
at protecting suppliers.
Ms. Tacon said Tesco "had acted unreasonably when delaying
payments to suppliers, often for lengthy periods of time."
Tesco said it accepts the findings of Tuesday's report, adding
that it "will continue to work collaboratively with suppliers to
further build trust."
The GCA said it is requiring Tesco to stop making unilateral
deductions from money owed for goods supplied, allowing suppliers
to challenge a proposed deduction.
Tesco will also have to correct pricing errors within seven days
of notification by a supplier and improve its invoicing practices.
The company has four weeks to outline how it will implement the
recommendations.
"The absolute focus on operating margin had damaging
consequences for the business and our relationship with suppliers.
This has now been fundamentally changed," said Tesco Chief
Executive Dave Lewis in a statement. "We are sorry," he added,
characterizing previous practices as "both unsustainable and
harmful to our suppliers."
Ms. Tacon's investigation revealed payments delays arising from
data input errors, duplicate invoicing and deductions to maintain
Tesco margin among other things. "The sums were often significant
and the length of time taken to repay them was too long," said Ms.
Tacon.
She said one Tesco supplier was owed a multimillion pound sum as
a result of price changes being incorrectly applied to Tesco
systems. This was eventually paid back by Tesco more than two years
after the incorrect charging began.
The GCA noted that Tesco's relationships with suppliers have
recently improved.
It began its probe in February 2015, following an accounting
scandal that rocked Tesco the prior year, culminating in a slew of
high-level departures, including the resignation of Chairman
Richard Broadbent.
Britain's largest retailer first flagged issues with its
accounts in September 2014, revealing a £ 263 million profit
overstatement. The supermarket chain continues to be investigated
by the U.K.'s Serious Fraud Office, which has the jurisdiction to
criminally prosecute entire companies and individuals on matters
relating to fraud, corruption and bribery.
The GCA's powers are far more limited, with the agency currently
unable to fine supermarkets. The body was created in 2013 to
oversee the relationship between U.K. supermarkets and their
suppliers and the probe into Tesco marked the first of its kind by
the regulator.
Ms. Tacon on Tuesday said she has asked the Competition and
Markets Authority to explore whether companies should be allowed to
pay for "category captaincy" which allows suppliers to manage the
selection and display of products across a category with the aim of
driving sales. She said the practice could hurt smaller suppliers
who can't effectively compete for these positions or negotiate for
shelf space.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
January 26, 2016 06:25 ET (11:25 GMT)
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