Britain’s grocery code adjudicator Christine Tacon has launched the investigation after allegations that Tesco delayed payments to suppliers and unfairly handled payments for shelf promotions.
The claims will come as a blow to Britain’s biggest supermarket, which has moved to repair its brand’s links to suppliers over recent years.
In 2013, Tesco’s Love Every Mouthful campaign promoted Tesco’s food offer and television ads attempted to present a ‘united front’ among its farmers and food producers.
New Tesco boss Dave Lewis, meanwhile, recently introduced an internal supplier network to improve communications and relations within Tesco’s supply chain.
Although business secretary Vince Cable is currently pushing through legislation that allows Tacon to fine supermarkets up to 1% of their annual turnover if found guilty of misconduct towards suppliers, Tesco won’t face any potential fines as the allegations would have happened prior to the legislation going through.
“Today is an historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth,” said Cable.
“I have also agreed an increase of almost 40% in the adjudicator’s funding for the coming year, so that it can carry out more of its important work.”
The groceries code adjudicator, which was set up in 2012 to regulate Britain’s biggest supermarkets and to ensure each enforces the Groceries Supply Code of Practice legislation, joins the Serious Fraud Office and the Financial Reporting Council as bodies currently investigating Tesco.
“This is the first investigation I have launched and it is a significant step for the GCA,” said Tacon, who believes the investigation will take up to nine months.
“I have applied the GCA published prioritisation principles to each of the practices under consideration and have evidence that they were not isolated incidents, each involving a number of suppliers and significant sums of money.”
Anton Dominique Chief Marketing Officer at the London School of Marketing believes ‘this latest scandal will severely erode customer trust and shareholder confidence.’
He explained: “Corporate credibility and corporate ethics play a significant role in a consumer’s purchasing decisions and as we are increasingly seeing, consumers have shown a willingness to pay more for products from a store with a good ethical record.
Tesco’s brand has now become synonymous with scandal and is in a position that will take at least few years to recover from.”