David Lowe
Partner
Head of Commercial Contracts
Co-Chair of ThinkHouse
Article
8
In this alert we sum up various developments relating to the UK's Groceries Supply Code of Practice (GSCOP) over the last few months - including the Groceries Code adjudicator's report into Tesco.
The Groceries Code Adjudicator issued her findings on the Tesco investigation at the end of January.
Yes. The key findings are:
No. Tesco were not at risk of a fine as the investigation covered a period when the adjudicator had not been given power to fine. There is no hint in the report as to whether Tesco would have been fined if the adjudicator had had the power.
No. The adjudicator has made a series of recommendations that Tesco is required to follow:
To ensure that Tesco does take steps to address the position:
There will be those who feel that without a big fine supermarkets will not ensure they change behaviour. After all, a series of detailed recommendations do not make headlines.
But detailed recommendations which intrude into the detail of Tesco's financial systems with a quarterly review may well have more impact. No one wants to be on report. Addressing the abuses on payment periods and unilateral deductions are probably going to have a more direct positive impact on suppliers than a fine.
Certainly the Adjudicator's findings should embolden suppliers to challenge supermarket payments and deductions.
The Grocer has this week reported that the Government (Department for Business - BIS) is considering consulting on extending GSCOP down the supply chain. At the moment GSCOP only applies to the contracts between the 10 designated retailers and their direct suppliers. As shown by the recent headlines on the price of milk, there are concerns that this does not ensure that suppliers further down the supply chain are fairly treated.
Extending GSCOP down the supply chain would be an enormous step:
This could be the government attempting to push a difficult issue into the long grass, but if not would see the food and drink sector becoming highly regulated.
As and when the consultation is issued it will be key for all suppliers to comment.
The Adjudicator had identified that looking at retailer forecasts was a priority. Concerns had been raised that retailers adopted sloppy forecasting causing significant costs to suppliers.
The Adjudicator has now issued a brief note on forecasting finding that all retailers' approaches appear to be compliant with GSCOP. It also goes on to comment on how forecasting can be improved. This might be useful to suppliers suffering poor forecasting practices.
Not a legal issue but it is interesting to see that ASDA has joined European buying group EMD.
The rise of these multi retailer buying groups brings a new challenge to suppliers - buying groups such as EMD, Auchan, AMS etc each bring buying power (assuming they can consolidate their member's purchasing) that exceeds Tesco.
The European Commission has issued a report on Unfair Trading Practices in the Food Supply Chain.
It provides an overview of the various national arrangements across the European Union - for example 20 of the member states have or are about to introduce legislation in the food supply chain (most recently Ireland).
The annual Groceries Code Adjudicator survey has been launched. This is a key survey heavily relied upon by the Groceries Code Adjudicator. All the information provided is in strict confidence.
The results of the survey will be launched at the annual Groceries Code Adjudicator conference, which will be held on 27 June 2016 in Westminster, London. It is a useful insight into the adjudicator's priorities.
For an overview of GSCOP, please see our previous article "The Groceries Supply Code of Practice".
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