Clive Black, director and head of research at Shore Capital said the probe would be “as much about the GCA as it is Tesco”.
While business secretary Vince Cable announced legislation that would give Tacon the power to fine firms breaching the Groceries Supply Code of Practice (GSCOP) last week, Black stressed this would not apply retrospectively.
‘Different management’
He said the GCA’s probe appeared to be linked to practices applied last year, presided over by “a materially different management team”.
That, and the fact that it was occurring months after the launch of the Financial Conduct Authority’s and Serious Fraud Office’s investigations into the retailer, suggested Tacon was trying to validate her office.
“The GCA probe … feels very much like self-justification by an organisation that has talked much but not actually done anything of note in practical terms to our minds,” said Black.
“We see the GCA as a paradox. On the one hand it is potentially a strong force for good, controlling the worst potential excesses of a highly concentrated retail segment. As such its existence and the powers it has probably help support elements of the supply chain.
‘Remarkably inactive’
“That said, despite much chatter, to the best of our knowledge no complaints have been upheld or sanctions made by the GCA, which makes it a remarkably inactive organisation …”
As a result, the GCA needed to be seen to be delivering concrete results from the outcome of its initiative, he said.
“In the absence of material fines, which we believe to be the case with respect to September 2014 matters, we see this inquiry as a process that is as much about the GCA as it is Tesco.
‘Investigation into GCA’
“Hence, we will await with interest the enquiry output; no doubt after some years if the GCA still has not made material pronouncements or sanctions then there will be an investigation into the effectiveness of the GCA, Joseph Heller [who coined the phrase ‘Catch-22’] comes to mind ...”
David Noble, group ceo of the Chartered Institute of Procurement & Supply (CIPS), welcomed the GCA’s investigation.
But he warned: “For too long the retail sector has felt able to operate according to its own norms and practices without regard for best practice in procurement and supply chain management. To really sort out this mess at source, there needs to be clear accountability and higher standards within the retail procurement industry as a whole.”
Scotland’s rural affairs secretary Richard Lochhead commented: “I have always argued for a robust role for the GCA and welcome this evidence that she is taking a keen interest in relations between suppliers and retailers.
“Suppliers in Scotland who have evidence that is relevant will now be able to bring that forward and I would encourage them to do so. I hope this can help deliver greater transparency and accountability in the grocery supply chain.”
Tacon announced yesterday (February 5) an official investigation into potential breaches of GSCOP by Tesco, because of “reasonable suspicion” that it had broken the Code.
She claimed evidence suggesting non-compliance had come mainly from an initial report from accounting firm Deloittes into Tesco’s accounting practices, an internal probe by Tesco and supplier complaints.
Tacon has looked into three major complaints about the behaviour of the top supermarkets since her appointment on January 21 2013.
Compensation payments
Two concerned Morrisons requesting supplier payments for increased multi-channel, including online, exposure, the Cooperative Group requiring suppliers to make compensation payments for not meeting service level targets.
The third related to a request from Tesco for suppliers to pay to secure eye-level positions for products on the shelves of its stores.
Tacon resolved the Morrisons issue in correspondence with the retailer. The Cooperative Group agreed to drop its initiative and Tesco wrote to buyers reminding them not to ask for such payments and withdrew the request.
A spokeswoman for the GCA confirmed that Tacon could not fine Tesco if retrospective Code breaches were established. But she could make legally binding recommendations for the company to change its practices and force it to take out newspaper adverts owning up to such actions.