The new Groceries Code Adjudicator, tasked with policing the multiple retailers, has pledged to clean up illegal “kickback” practices, whereby suppliers are forced to use third-party suppliers favoured by the supermarkets, rather than choosing their own.
Christine Tacon pledged to target kickbacks
The Groceries Code Adjudicator Bill received Royal Assent in Parliament last Thursday (April 25), granting power to an adjudicator to hold large supermarkets to account over malpractices in their direct relationships with suppliers.
The Act tasks Christine Tacon – the appointed adjudicator – with responsibility for enforcing the Groceries Supply Code of Practice (GSCOP). This was created by the Competition Commission following an investigation in 2009, which found that supermarkets were passing undue risk onto their suppliers.
Third-party supplier dealings
Tacon – who starts her role in June – told FoodManufacture.co.uk an early aim would be to look into third-party supplier dealings.
“One of the areas I’m most interested to tidy up is where direct suppliers are required to use third-party suppliers, which in their opinion are more expensive than [ones] they could get,” she said. “And if the retailer cannot justify that and is taking a kickback from it, that is in breach of the code.”
She added that she would also investigate where supermarkets had demanded deeper promotions, more promotions or longer-lasting promotions than had been initially negotiated.
Tacon said she would seek to “clean up all these areas where people have been taking extra bites, where people are saying: ‘I didn’t realise I would have to do this and, had I known, I wouldn’t have agreed that price.’”
She added: “I want it all to come back to an annual negotiation that will be just as fierce, if not more so, than before – but to stop all the uncertainty arising at a later stage.”
The code’s remit, which is legally binding on retailers, covers the direct supplier-retailer relationships of 10 major supermarkets: Tesco, The Co-operative, Sainsbury, Marks & Spencer, Asda, Lidl, Aldi, Waitrose, Iceland and Morrisons.
Each of the retailers has a designated code compliance officer and the aim will be to work with them to determine whether a breach has occurred, and to seek to avoid formal investigations.
“Clearly, if I’m not making progress that way and I’m still receiving complaints then I can start my legal routes, which the Act gives me powers to do,” said Tacon.
Direct dealings with suppliers
Over the next few months, Tacon will be clarifying her remit to industry, which is confined to retailers’ direct dealings with suppliers, and which she stressed does not cover pricing.
“My role has nothing to do with price: if somebody has agreed to supply something at a cost below what they can actually do it for, that is nothing to do with me. My role is very much ensuring that once you have had your negotiations, you don’t suddenly get your payment terms changed or are asked for a retrospective discount because the retailer hasn’t hit their end-of-year target.”
Andrew Opie, food director at the British Retail Consortium, said he awaited the Adjudicator’s legal guidance, which will be issued in the coming months.
“Now that the Groceries Code Adjudicator is becoming law we want to ensure it works well and is fair to all parties,” he said.
“We look forward to guidance from the Adjudicator making it clear what her responsibilities are and what she will be doing, which is to oversee GSCOP, which only governs those who directly supply to retailers, to avoid any misunderstanding.”
