morrisons trolleys

Morrisons has issued an apology after it was found to have breached the Groceries Supply Code of Practice (GSCOP) in relation to demands for lump sum payments of about £2m last year.

The retailer has also offered to repay money to suppliers who had paid money for no clear benefit and disciplined staff as part of the probe by Groceries Code Adjudicator Christine Tacon.

Overall Morrisons accepted that a total of 19 requests for lump sum payments last year had not been related to the relevant supply agreements and were therefore in breach of the Code. These may also have been retrospective requests.

The Adjudicator received evidence of the requests in June and July last year from a number of sources. The evidence indicated that Morrisons had requested lump sums to be paid for the first half-year (which ended 1 August) within four weeks.

Tacon said it was not clear whether these were prospective or retrospective, given the short time remaining to the half-year end. She said no negotiation was offered, there were no references made to supply agreements nor to any variation being made to the relevant supply agreement, with due notice being given.

As part of her separate investigation into Tesco, The Adjudicator also received evidence that Morrisons had called a meeting of its largest suppliers in June 2015, with senior personnel present, and requested lump sum payments, not only for the first half-year but also for the second half. Figures of about £2m for each half-year were mentioned by a number of suppliers.

Tacon wrote to Morrisons CEO David Potts to alert him to the issue, following which the retailer launched an internal investigation that involved reviewing 66,000 emails, interviewing employees and taking disciplinary action where appropriate. It also put in place further training for staff on negotiation techniques permitted by the Code, with particular focus on variation to existing supply agreements.

It appears that these undertakings have been sufficient to persuade Tacon not to launch a full investigation, which would have come with the potential to fine the retailer up to 1% of its turnover.

Tacon acknowledged that Morrisons had responded immediately when alerted to the issue, had conducted an extensive internal investigation, and this had led to the requests not being followed up. Requests for money for the second half-year then became genuine negotiations between retailer and supplier. The retailer told her it had contacted suppliers who had paid money for no clear benefit and offered it back, which in some cases was accepted. Those suppliers suffered no detriment and said they were happy with the outcome.

The GCA has been assured that additional training, more robust internal processes and increased audits are now in place and that Morrisons checked to see that no similar activity occurred at its year end in February 2016.

“These events happened a year ago and since then much has been achieved to ensure they don’t happen again. However, we are sorry they happened in the first place,” said Potts.

“As soon as we were made aware of these requests to suppliers, we conducted a detailed internal investigation and co-operated fully with the Groceries Code Adjudicator.

Since then, we have completely changed the way we work with suppliers. I have brought in a new management team who have modernised and simplified all of our buying practices. We have also reorganised and retrained our buying team.

“All of our new ways of working with suppliers have been shared with the Adjudicator.”