christine tacon

Christine Tacon: ’It would be great if Booker can be code-compliant in the same way’

Groceries Code Adjudicator Christine Tacon has called on Booker to be signed up to GSCOP, either voluntarily or officially, on the back of the CMA’s decision to allow its merger with Tesco.

Tacon said she had already spoken to Booker chief executive Charles Wilson, amid concerns from suppliers that the merger could see the combined group circumvent the code in its buying arrangements with wholesale suppliers.

There have been calls previously for Tacon’s remit to be extended to include wholesale operators such as Booker but the Adjudicator said that, now that the CMA had provisionally cleared the £3.7bn merger, Booker needed to act to allay suppliers’ fears.

“It depends how they intend to operate after the merger,” Tacon told the BBC earlier today. “If they operate as one buying group then they will automatically be covered by GSCOP, but they may look to do it differently.

“I’ve already spoken to the chief executive of Booker and said it would be great if Booker can be code-compliant in the same way, whether that is voluntary or whether it’s because they actually come under the code because they are regulated.

“That will be determined by their set-up and the Competition and Markets Authority.”

In its provisional findings last week the CMA appeared to try to play down fears among suppliers that Booker might escape GSCOP scrutiny.

It spoke of a ‘small number of concerns’ that were raised ’about the possibility that Booker, as a wholesaler, post-merger might not be covered by GSCOP.

‘The concern, as put to us, is that the merged entity might use the Booker purchasing arm to obtain supplies on behalf of the merged entity as a whole (including for grocery retailing),’ said the report. ‘The concern is that, by doing so, it could circumvent the protection otherwise created for suppliers by GSCOP in relation to supply to grocery retailers.’

But the CMA went on to say that under GSCOP any party that carried out a substantial part of the Tesco business would become a designated retailer and therefore automatically be covered.

‘Further,’ it added, ’if the GCA considers it appropriate for any changes to be made to the Groceries Code, he or she would recommend them to the CMA.

‘For these reasons, we provisionally conclude it unlikely that the merged entity would be able to circumvent the existing application of GSCOP to supply terms pertaining to purchases made for the purpose of grocery retailing.’

Yet with Tacon suggesting that Booker could avoid having to become GSCOP-compliant, depending on how Wilson and Tesco CEO Dave Lewis set up the organisation, the CMA’s wording has far from convinced suppliers.

One leading source said: “I don’t think that Booker suppliers will find much reassurance in the words of the CMA with the Tesco takeover looming and great uncertainty over just how they plan to set up their buying.”

The British Brands Group, in its submission to the CMA’s phase two investigation, warned the Tesco-Booker alliance could open the door to abuses of buying power.

It also said the questions over how GSCOP would apply to the proposed merger was a chance for the CMA to change the guidelines so any provider of grocery products with more than £1bn annual turnover automatically came under GSCOP.

While Tacon has heaped praise on Tesco for its improvement in its conduct with suppliers under Lewis since the findings of her investigation into the 2014 profits scandal reported last year, the BBG is among those calling for her role to be extended into the wholesale sector.

BBG director John Noble said: “I have no doubt Tesco will be bending over backwards to be code-dependent. But the ball is now in the merged businesses’ court to reassure suppliers that the retail businesses will continue to be code-compliant, once the two operations come together.”