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Tesco is under investigation by the Grocery Adjudicator for mistreating its suppliers. Photograph: PHIL NOBLE/REUTERS
Tesco is under investigation by the Grocery Adjudicator for mistreating its suppliers. Photograph: PHIL NOBLE/REUTERS

Supermarket watchdog probe into Tesco is flawed

This article is more than 9 years old
Clive Black

The Groceries Adjudicator is guilty of self-preservation rather than tackling unfair treatment of suppliers in the food chain, says Clive Black

The issue of treating suppliers fairly is a serious one. There can be tragic consequences when a company cannot receive monies due from a customer, at times leading to closure. Reasonable payment terms are therefore an important part of doing business decently.

Of course, one person’s decency can be another’s outrage, and in this respect a broad understanding and dialogue of satisfactory terms is a good thing.

While businesses, by necessity, like to keep their terms of trade secret from competitors, this has presented problems for producers and businesses that supply supermarkets. There have been many disturbing instances where businesses have been abused, bullied and cajoled into activities that they are unhappy about, but due to commercial sensitivity cannot bring out into the open.

The extent of supermarket misbehaviour is hard to pin down, but as a result of hugely expensive and pretty inconclusive Competition Commission (CC) investigations into the British grocery market, it was deemed that a Grocery Complaints Adjudicator (GCA) should be appointed to make sure that fair play existed.

This appointment was made, it should be said, with little empirical evidence of wholesale abuse and, I sense, much urban mythology – not to understate the dreadful consequences when things genuinely go wrong.

‎The CC, now replaced by the Competition & Markets Authority (CMA), felt that a Code of Practice under the auspices of the GCA would formally assist the delivery of good behaviour by the retail trade. And, to the best of my knowledge, no investigations have since been revealed nor outcomes announced since the GCA was established in 2013.

Maybe it is the case that the presence of the GCA has cleaned up the industry and that forthcoming sanctions, including fines of 1% of sales, mean that all is hunky dory. I sense that commercial fears of losing a supermarket contract are , in fact, behind the low level of complaints, along with the urban mythology.

Whilst all this is so, the decision by the GCA to investigate matters at Tesco following the retailer’s annus horribilis in 2014 (‎several profit warnings, accounting irregularities, an FCA and subsequent SFO investigation, management overall) seems remarkable.

Indeed, this inquiry leads us to ask why the GCA didn’t find out what was going on in Tesco long ago, what it actually does and why oh why it is bothering to jump on the Tesco bashing bandwagon when a new CEO has, of his own volition, ‎opened the eyes of the world to the group’s supply chain issues and announced fundamental changes to its sourcing strategy and supply chain relations?

Horse bolted, gate closed comes to mind. Indeed, if Malcolm Tucker were involved in this matter we sense that stronger language may have been used. Which brings us back to the question of what the GCA does, how much it costs and whether the ‘insurance policy’ it provides is a worthwhile cost.

The focus on Tesco also leads us to ask if slow payments and other unpalatable tricks are only the preserve of supermarkets. Do all farmers and processors pay on time? And what of Vince Cable’s department and the government? How many small businesses suffer due to the state not meeting acceptable and/or pre-agreed payment and broader commercial terms? Should there be a quango for all segments and sectors of the economy to deliver fair play?

The GCA should have the ability to properly and fairly defend its purpose, work and effectiveness, of course, but experience tells us that government bodies are most concerned about self-preservation. The Tesco debacle, therefore, perhaps raises more questions than it answers. Indeed, we wonder if Mr Tucker would call an investigation to see if the GCA is investigating the supermarkets to the food industry’s benefit; it has the makings of a classic edition of the Thick of It!

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