In the small print of its annual report, which also revealed group trading profits down to £6.4bn, Tesco said: “Regrettably, we have concluded that there have been a number of instances of probable breaches to the Code which fall short of the high standards we expect to uphold in our dealings with our suppliers.”
The Groceries Code Adjudicator (GCA) Christine Tacon launched an investigation into Britain’s biggest retailer in February after evidence of suspected breaches to the GSCOP came from three main sources.
At the time, Tacon said she had “reasonable suspicion” that the supermarket had breached the Code.
‘Evidence from Deloitte’
'Probable breaches' to the Code
“Regrettably, we have concluded that there have been a number of instances of probable breaches to the Code which fall short of the high standards we expect to uphold in our dealings with our suppliers.”
“I have evidence from the Deloitte report, an internal report prepared for me by Tesco and from suppliers,” she said.
If Tacon agreed Tesco was in breach of the Code, she would not be able to issue a financial penalty, since her investigation began after she was given the power to fine retailers 1% of turnover.
However, she would be able to make binding recommendations, take Tesco to arbitration and name and shame.
In its report, Tesco said it was taking effective action to prevent breaches to the GSCOP from happening again.
“We are fundamentally changing the way we work with our suppliers to deliver a more sustainable and collaborative business model for everyone in the supply chain.
“In addition, we are significantly up-weighting our Code compliance programme,” it said.
Updates to its GSCOP programme
Updates to its GSCOP compliance programme would include comprehensive new-starter training and annual refresher training, according to the report.
The GCA said:
“The GCA announced its investigation into Tesco on February 5 this year after receiving information relating to practices associated with the profit over-statement announced by the retailer.
“That investigation is underway and no further comment is being made until it has been completed.”
Improved guidance on processes would be developed and there would be “deep-dive” audits throughout the year, as well as bi-annual compliance declarations and disciplinary action where necessary, it added.
Tacon’s investigation started after Tesco admitted overstating its half-year profits last summer by £326M, which the Serious Fraud Office is currently looking into.
A Tesco spokesman said: “The Annual Report repeats what we said in February, which is that following our announcement last September regarding commercial income, we worked with the Adjudicator to identify any relevant GSCOP issues.
“An internal review, which we shared with the Adjudicator, 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 our suppliers.”