Tesco 'behaved like the Mafia'

By Sean Poulter

Suppliers treated unfairly by Tesco will receive no financial redress unless they take legal action, which is unlikely. Photo / Bloomberg
Suppliers treated unfairly by Tesco will receive no financial redress unless they take legal action, which is unlikely. Photo / Bloomberg

Tesco used 'mafia-style' tactics to squeeze suppliers, driving some to the brink of bankruptcy.

Britain's biggest supermarket has been found guilty of 'unfair and unreasonable' behaviour in a damning report by the ombudsman.

The company delayed making payments, some as big as £2million, to suppliers for up to two years.

Tesco also made unreasonable deductions from payments and double-charged firms whose products were pushed as part of supermarket promotions.

READ MORE:
Christopher Niesche: Woolworths' bright idea ... that wasn't
Where to shop for the cheapest groceries

However, it has avoided a financial penalty - which could have topped £400million if linked to turnover.

This is because the Government delayed giving the ombudsman the power to impose fines, apparently at the behest of Chancellor George Osborne.

Suppliers have condemned Tesco's behaviour as 'totally disgusting', while suggesting that the chain used its financial muscle to act like a mafia Godfather.

Mike Jessop, whose dairy-free confectionery firm nearly went bankrupt after Tesco delayed payments, accused the store of 'arrogance' because of its dominant market position.

'It was 100 per cent like the mafia and the film The Godfather,' said Mr Jessop, who runs Moo Free Chocolates. 'They were involved in behaviour that no reputable UK business should be practising.'

I found lots of behaviour that breached paragraph two of the code, which is to treat people fairly and reasonably.

The Grocery Code Adjudicator (GCA) found that Tesco 'knowingly delayed paying money to suppliers in order to improve its own financial position'. The net effect was to inflate Tesco's profits and give the City a false impression of the firm's performance.

A separate investigation by the Serious Fraud Office is looking into allegations that key directors effectively falsified Tesco's accounts, boosting profits by more than £300million.

Any prosecution could see some former Tesco executives in the dock and fines for the company of up to £500million.

The GCA's report represents a damning indictment of Tesco's management and its former chief executive, Philip Clarke, who was in charge between 2011 and 2014.

The evidence of unfair practices covered the period from June 2013 to February 2015 - although some believe the scandal dates back much further.

We shared these practices with the Adjudicator and publicly apologised. I would like to apologise again. We are sorry.

Adjudicator Christine Tacon found that Tesco had breached the legally binding code aimed at protecting grocery suppliers. 'The length of [payment] delays, their widespread nature and the range of Tesco's unreasonable practices and behaviours towards suppliers concerned me,' she said. 'I was also troubled to see Tesco at times prioritising its own finances over treating suppliers fairly.'

Asked if she thought the firm had bullied suppliers, she said: 'I found lots of behaviour that breached paragraph two of the code, which is to treat people fairly and reasonably.'

A separate investigation will look at whether Tesco effectively charged suppliers huge fees for shelf space, distorting competition and customer choice, which is also a breach of the code.

Suppliers treated unfairly by the store will receive no financial redress unless they take legal action, which is unlikely. Former Lib Dem Business Secretary Sir Vince Cable, who created the GCA position, suggested Mr Osborne had delayed plans to give the ombudsman the power to fine supermarkets - which only came into force after the Tesco investigation began.

Tesco's group chief executive, Dave Lewis, accepted the GCA's findings. He said the report was consistent with an internal investigation into former 'harmful practices', adding: 'We shared these practices with the Adjudicator and publicly apologised.
'Today, I would like to apologise again. We are sorry.'

He added that since January 2015, changes have been in place which address the majority of the issues raised. The GCA has given Tesco four weeks to meet a series of recommendations for improvement.

- Daily Mail

Get the news delivered straight to your inbox

Receive the day’s news, sport and entertainment in our daily email newsletter

SIGN UP NOW

© Copyright 2016, NZME. Publishing Limited

Assembled by: (static) on production apcf05 at 03 Dec 2016 09:53:42 Processing Time: 1394ms