christine tacon

The Groceries Code Adjudicator has told three supermarkets they will be formally investigated unless they either pay millions to suppliers or provide new evidence they are innocent of multiple breaches of the code.

The unnamed supermarkets have been given a deadline of next month by Christine Tacon, having been accused by suppliers of unjustly deducting tens of millions of pounds for so-called drop & drive discrepancies.

Tacon said the supermarkets had been “drinking at the last chance saloon” by ignoring her warnings, revealed by The Grocer in December, that she was close to launching her first investigation since the probe on the back of the Tesco scandal, announced in February 2015.

The GCA has the power to fine supermarkets up to 1% of their turnover if they are found guilty of a breach of the code.

The allegations concern retailers that have been routinely penalising suppliers over perceived discrepancies in pallet loads delivered to distribution centres.

Tacon said while several supermarkets had heeded her warning that they needed to act or face action, the three in question had failed to make changes and were facing a final warning. She said they could avoid action by paying suppliers the money allegedly owed or be providing proof that they were not guilty.

A compromise deal on pledges of changing behaviour could still also be possible.

Tacon said information supplied by a group of 20 leading suppliers last year had shown they were being deducted between them a massive £15m a year by supermarkets for alleged discrepancies, equivalent to 40 cases in every 10,000 being questioned, a figure she said would be dwarfed once that was extended to cover all supermarkets.

In the past few months some retailers, including Sainsbury’s, have backed down to pressure from the Adjudicator and suppliers and introduced a new system of so called “good faith reporting”, in which supermarkets agree to pay suppliers for all deliveries and rather than have the power to question any load, use a system of spot check audits instead. Only if they find discrepancies are suppliers fined.

Tacon said such systems had been found to reduce the amount being demanded in penalties from suppliers by an incredible 90%.

However, the Adjudicator said so far the supermarkets in question had refused to budge on the issue, despite drop & drive remaining her number one area of concern.

The Grocer has learned that more evidence that the issue is the biggest threat facing suppliers is due to be presented at the GCA annual conference in London on Monday.

A poll by YouGov, to be presented at the event, which had over 1,400 responses from suppliers, found 13% of all respondents had raised issues with drop & drive.

However, the figure soared to 24% for chilled, dairy and ready meal suppliers, who are those most in the firing line for such activities. The survey also found 18% of meat and fish suppliers and 17% of fruit and veg suppliers had claimed they were subject to breaches of the Code under drop & drive.

“This issue has been going on for years,” said Tacon. “A number of retailers know they are in the last chance saloon. I warned them in December and some have made significant improvements. I’m pleased to say that those who have brought in new systems have seen a huge reduction in the number of drop & drive discrepancies being raised.”