Tesco has been accused of employing tactics that breach the Supermarkets Code of Practice in its latest round of tough negotiations with suppliers.

Several angry suppliers told The Grocer that Tesco had called them to head office and asked for cash payments between £22,000 to £750,000 specifically because profits for the first half of the year were lower than expected.

"It's completely unethical," one supplier told The Grocer, after being asked for nearly £500,000.

"We were asked for £22,000," another supplier said. "We said okay, we are willing to pay it, but in return we want an agreement about how much you will grow our business. They were not willing to do that, or put anything in writing they just wanted the money and if we didn't pay them, they would delist our products."

A third added: "We were told there was a shortfall on the margin, and if we didn't show support there would be punitive action."

In the past few months a lot of pressure had been applied, he added. "We said we couldn't give them anything. They gave us a room and told us to think long and hard and come back with a solution and that it wasn't in our interests to walk out. We were made to feel like hostages."

He was initially asked for £750,000, but managed to settle for £100,000. One supplier had been asked for as much as £7m, he added.

Tesco's half year drew to a close on 22 August and results for the half will be reported on 6 October. The Supermarkets Code of Practice specifically bans retailers from asking suppliers to cover a shortfall in profits (see box), although it is normal practice to meet once a quarter to discuss trading terms. A leading competition lawyer told The Grocer the tactics described would fall foul of both the current code and the new Groceries Supply Code of Practice, which was published this month and will come into force in February. "Under the GSCOP, there is an overriding obligation in clause 2 of the code that a retailer 'must at all times deal with its suppliers fairly and lawfully'. The practices these sources allege would not be regarded as fair dealing as that expression is generally understood," he said.

Tesco responded in a statement. "These are serious but false allegations made anonymously and without any evidence to support them. We negotiate with suppliers all the time and our approach is to be fair but firm in the interests of consumers, who expect us to fight their corner on price.

"We respect the Supermarkets Code of Practice, which is about to be tightened up even further, and already have our own compliance officer who suppliers can complain to if they wish. They will not be delisted or penalised for complaining."