Watchdog criticises Tesco for mistreating suppliers

Tesco has been rapped by the grocery watchdog for propping up its finances by short-changing suppliers when it began lagging behind rivals.

Tesco Sky

Groceries Code Adjudicator (GCA) Christine Tacon found that Britain’s biggest retailer had an endemic culture of making unilateral deductions from suppliers’ bills and delaying payments (including packaging firms) – in one case taking more than two years to pay a multi-million pound debt.

“It was clear to me the pressure on the (Tesco) buyers and the finance teams to meet their margin targets was an overriding pressure within the business and it was widespread … it was everywhere,” said Tacon.

Tesco chief executive Dave Lewis insisted  the supermarket giant had completely changed the way it dealt with suppliers.

Tacon said she was unable to find evidence showing involvement of top managers at Tesco.

“But the pressure was clearly being put on them (buyers),” she added, citing examples of buyers having to go to more senior colleagues to get approval to pay an invoice that was due.

Tesco said on Tuesday it accepted Tacon’s findings and would continue to work with suppliers to build trust after working hard over the past year to change the business.

“I would like to apologise again. We are sorry,” said Lewis.

The GCA ordered Tesco to stop making unilateral deductions from money owed for goods and give suppliers 30 days to challenge any reduction. If challenged, Tesco will not be entitled to make the deduction.