Tesco ‘sorry’ after admitting harmful practices

The group chief executive of Tesco has said “we are sorry” after admitting the company used “unsustainable and harmful” practices against suppliers.

The admission came after retail watchdog, the Grocery Code Adjudicator (GCA), ordered the retail giant to make “significant changes” after finding it had deliberately delayed payments to suppliers to support its profits.

The GCA launched its investigation in February 2015. On Tuesday, it revealed Tesco had breached part of its code protecting suppliers against delayed payments. It found “significant amounts” were delayed for long periods of time, in some instances up to 24 months.

“Errors and complications in Tesco’s systems resulted in delay in payments which frequently extended to many months. I consider such delay to be unacceptable and unreasonable,” said Grocery Code Adjudicator Christine Tacon.

“Buyers frequently sought to use money owed to a supplier as leverage in negotiations for future agreements or promotions. I found that Tesco acted unreasonably when seeking to bring the resolution of debts into other commercial negotiations and delaying payment of monies owed until other negotiated terms were agreed.”

A second aspect of the investigation, looking at whether the supermarket chain had sought payments to secure better positioning or increases in shelf space, failed to find any evidence of a breach.

Responding to the findings, Tesco group chief executive officer, Dave Lewis, said: “In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry.

“I am grateful to the Adjudicator for the professional manner in which the investigation has been conducted. We accept the report’s findings, which are consistent with our own investigation.”

Mr Lewis said a number of practices had now been “fundamentally changed”.

Tesco has some 3,000 UK suppliers, who in June last year rated the supermarket as the worst of the major chains at complying with the GCA code.

Tracy Ewen, managing director of IGF Invoice Finance, which works with many of the suppliers, added: “For many in the supply chain, Tesco’s payment terms have been unsustainable due to delays in payments and unexpected changes in contract terms.

“This is a reality that SMEs have had very little power to change in the past; the GCA stepping in to censure Tesco over its behaviour is a step forward in helping small businesses tackle the constant stream of unfair payment terms coming from large corporations.”