The Groceries Code Adjudicator has launched an investigation into Tesco over suspicions it has treated its suppliers unfairly.
Christine Tacon said she had formed a “reasonable suspicion” that Tesco had breached the Groceries Supply Code of Practice. It is the first investigation she has launched since her role was established in 2013.
She took the decision after considering information submitted to her relating to practices associated with the company’s £263m profit overstatement last September.
Last week measures were laid in Parliament to give the GCA powers to fine supermarkets up to 1% of their turnover if they are found in breach of the code.
The investigation is expected to take place over the next six to nine months and the Adjudicator has called for further evidence to be submitted by 3 April 2015.
It will consider practices which have resulted in delay in payments to suppliers, as well as incidents where suppliers have been required to make payments for better positioning of goods which are not related to a promotion.
“I have taken this decision after careful consideration of all the information submitted to me so far,” Tacon said.
“I have applied the GCA published prioritisation principles to each of the practices under consideration and have evidence that they were not isolated incidents, each involving a number of suppliers and significant sums of money.”
Welcoming the investigation, John Allan, Federation of Small Businesses (FSB) national chairman, said: “We’ve seen lots of evidence that small firms are being unfairly squeezed by late payments in the food processing industry and other sectors, so we welcome the GCA’s investigation. We would encourage the GCA to use its new powers and include the major supermarket chains in the scope of the investigation.
“Late payment can have disastrous effects on a small firms’ cashflow and pushes many businesses to the brink. There needs to be respect in the relationship between big businesses and firms in their supply chains.”