Tesco UK reacts to gov report on payments controversy

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CEO Dave Lewis apologises for "certain practices" after report criticises supplier mistreatment and manipulation of margins

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26 January 2016 | 0

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The UK’s Grocery Code Adjudicator has published its long-awaited report into the financial irregularities that rocked Tesco in 2014. Compiled by Christine Tacon, who holds the position of Groceries Code Adjudicator, the report focused on the area of Tesco’s delayed payments to suppliers, and also on the area of payment by suppliers in order to secure better positioning – sections 5 and 12 of the code, respectively.

In the report, Tacon finds that while Tesco paid suppliers’ invoices regularly in accordance with its contractual terms, there were often times in which disagreements over amounts occurred. In these cases, significant amounts were delayed for long periods of time – in some cases up to 24 months.

The report goes on to say that these delays were intentional in order to stick to profit margins and improve Tesco’s own financial standing.

Regarding Section 12 of the code of practice, Christine Tacon stated that she did not find any evidence that Tesco accepted money or sought payment to give products better visibility. She did find evidence that suggested Tesco occasionally requested “investment” from suppliers that sometimes led to preferable positioning of certain products.

The report states a concern that such action may have been a “circumvention” of the code.

Tesco Responds

In a statement this morning, Tesco stated that it accepts the findings of the GCA report, and committed to continue to build trusted relationships with partners.

“In 2014 we underook our own review into certain historic practices,” Group CEO Dave Lewis said, “which were both unsustainable and harmful to our suppliers. We shared these practices with the Adjudicator, and publicly apologised.

“Today, I would like to apologies again. I am sorry.”

Lewis stated that he is grateful to the Adjudicator, and that he fully accepts the reports findings.

“Over the past year we have worked hard to make Tesco a very different company from the one described in the GCA report,” Dave Lewis said in his statement. “The absolute focus on operating margin had damaging consequences for businesses and our relationship with suppliers. This has now been fundamentally changed.”

Lewis, who took the reigns at Tesco in late 2014 after the scandal rocked the industry and former CEO Phil Clarked stepped aside, has made numerous high-profile changes to the way Tesco does business and how it deals with suppliers. “We have changed the way we work by reorganising, refocusing and retraining our teams, and we will continue to work in a way which is consistent with the recommendations.”

The full GCA report can be read here.

UPDATE: IBEC’s response to the decision by the GCA can be read here.

 

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