Tesco faces probe for mistreating suppliers

Tesco is likely to find itself under another investigation involving suppliers, amid concerns that it breached the Groceries Supply Code of Practice.

The Groceries Code Adjudicator (GCA) is now expected to join the Serious Fraud Office and the Financial Reporting Council in investigating the supermarket chain.

According to the adjudicator, Christine Tacon, she had "reasonable suspicion" that the code had been breached.

However, the GCA would not be able to fine Tesco for past offences.

In a statement, business secretary Vince Cable said, "Last week I secured the final agreement in government to proceed with legislation to enable the regulator to impose for those supermarkets found guilty of mistreating suppliers." (See: UK supermarkets to be penalised by industry regulator for mistreating suppliers).

Large retailers could be penalised up to 1 per cent of their annual UK turnover.

However, Tacon told the BBC that the legislation notwithstanding; she could not force Tesco to pay a penalty, because the offences happened prior to her office acquiring power to impose fines.

The GCA would probe Tesco's profits and delays in payments to suppliers and the investigation was expected to take up to nine months.

Cable said it was an historic day for the groceries code adjudicator and showed that the government had created a regulator that had real teeth.

An accounting scandal hit Tesco last September after new boss Dave Lewis came across irregularities into how it booked revenues relating to deals from suppliers.

Tesco finally announced a £263 million shortfall in its profits.

The code of practice for the grocery industry covered a number of measures as regards how suppliers were paid, The Telegraph reported.

The investigation into Tesco would cover allegations about whether it delayed payments to suppliers and demanded payments from businesses for more prominent positioning of their products within stores.

In a statement, Tesco said, ''We have worked closely with the office of the Adjudicator since its creation to put in place strong compliance processes.

"Following our announcement last September regarding commercial income, we have worked with her to identify any relevant GSCOP [code of practice] issues.

"An internal review we carried out and shared with the GCA identified some areas of concern. We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with suppliers.

"We will continue to cooperate fully with the GCA as she carries out her investigation and welcome the opportunity for our suppliers to provide direct feedback.''

The investigation has been welcomed by small businesses.