This article is more than 5 years old

This article is more than 5 years old

Britain’s grocery industry watchdog has launched an investigation into Tesco amid allegations that it delayed payments to suppliers and unfairly handled payments for shelf promotions.

The groceries code adjudicator (GCA), which is set to be handed new powers to impose penalties on large retailers of up to 1% of their annual UK turnover, said it had made the decision after considering information related to practices associated with Tesco’s first half profit over-statement.

The adjudicator Christine Tacon said: “I have reasonable suspicion that Tesco breached the code in two areas. One is reasonable payments and second is payments for better positions on shelf outside promotions.”

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Speaking to the BBC Radio 4’s Today programme, she urged suppliers to come forward and said their anonymity would be protected.

She said: “I can legally require suppliers to give me the information I want for an investigation. I have a legal duty to protect their anonymity. And in this case there is very much safety in numbers and I frequently hear about the same issues from every sector in groceries from toilet rolls, to apples, to wine. I’m just looking for a large amount of evidence and anonymity will be protected.”

Tacon added: “My sanctions are to issue legally binding recommendations on their processes and how they should behave in future. I can require them to name and shame - take out adverts in terms of what they have done. At this point I don’t have financial penalties because that part of my powers has not yet come into legislation.”

The watchdog said the probe, which will cover the conduct of Tesco from 25 June 2013 to 5 February 5 2015, was expected to take place over the next six to nine months and called for evidence to be submitted by 3 April.

The GCA’s probe adds to investigations by Britain’s Serious Fraud Office and the Financial Reporting Council into Tesco’s accounting scandal, in which it overstated profit by £263m.

A statement said: “The investigation will consider the existence and extent of practices which have resulted in delay in payments to suppliers. This will include in particular, but not be limited to, delay in payments associated with:

• Short deliveries, including imposition of penalties

• Consumer complaints where the amounts were not agreed

• Invoicing discrepancies such as duplicate invoicing where two invoices were issued for the same product

• Deductions for unknown or un-agreed items

• Deductions for promotional fixed costs (gate fees) that were incorrect

• Deductions in relation to historic promotions which had not been agreed.”

A Tesco spokesman said: “We have worked closely with the office of the Adjudicator since its creation to put in place strong compliance processes.

“Following our announcement last September regarding commercial income, we have worked with her to identify any relevant GSCOP issues. An internal review we carried out and shared with the GCA identified some areas of concern.

“We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with suppliers. We will continue to co-operate fully with the GCA as she carries out her investigation and welcome the opportunity for our suppliers to provide direct feedback.”

Business secretary Vince Cable said: “This is an historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth.

“Last week I secured the final agreement in government to proceed with legislation to enable the regulator to impose hefty fines for those supermarkets found guilty of mistreating suppliers.”