Tesco Probe Raises Concerns That Retailers Dominate Food Supply Chain

Tesco says it has mended its ways and Tacon acknowledges “improvements to its handling of payment disputes,” but the investigation has reignited concerns about the gulf that exists between retailers and their suppliers.

The Financial Times
Christine Tacon, UK Groceries Code Adjudicator
Christine Tacon, UK Groceries Code Adjudicator

Christine Tacon's probe into Tesco's accounting practices — her first as regulator of the U.K.'s supermarkets — has raised fresh concerns that the balance of power in the grocery supply chain still lies too far on the side of retailers, according to The Financial Times in London, U.K.

Tacon — a 56-year-old former engineer known to some as “take-on Tacon” for her hard stance on big grocers — was appointed to the new role of Groceries Code Adjudicator in 2013, after a series of Competition Commission inquiries found a supermarket price war was squeezing suppliers.

Her report on Tesco covered its treatment of suppliers between June 2013 and February 2015 following the exposure of a £326 million accounting scandal. It found that Britain's biggest grocer deliberately delayed payments or underpaid in an attempt to meet financial targets.

Tesco says it has mended its ways and Tacon acknowledges “improvements to its handling of payment disputes,” but the investigation has reignited concerns about the gulf that exists between retailers and their suppliers.

Sebastian Calnan, a consultant lawyer with EMW, a commercial law firm, says claims that payments by retailers are made late, or orders changed at the last minute, are “rampant.” But he says suppliers often accept defeat because the buying market is dominated by only a small number of supermarkets.

“Undoubtedly the largest link in the food chain is the commander of the prices,” he says.

According to Calnan, suppliers’ overriding concern is being delisted by supermarkets. He says suppliers regularly approach lawyers for advice on onerous contracts before pulling out for fear that a legal battle could lead to them being dropped by major chains.

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