Tesco is to be investigated under allegations that the supermarket giant mistreated suppliers and delayed payments, in the first case brought by a new watchdog.
The Groceries Code Adjudicator, Christine Tacon, announced the move, saying she had formed a "reasonable suspicion" that the retailer has breached the Groceries Supply Code of Practice.
She said she took the decision after considering information submitted to her relating to practices associated with the profit over-statement announced by Tesco last September. She has discussed the practices with Tesco and said she now needs more information from direct suppliers and others to determine what further action to take.
Tesco is to be investigated under allegations that the supermarket giant mistreated suppliers
Business Secretary Vince Cable said: "This is an historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth.
"Last week I secured the final agreement in government to proceed with legislation to enable the regulator to impose hefty fines for those supermarkets found guilty of mistreating suppliers.
"I have also agreed an increase of almost 40% in the adjudicator's funding for the coming year so that it can carry out its important work.
"Now that a formal investigation has been launched, I would encourage anyone with any evidence of wrongdoing to come forward and to be confident of being able to do so confidentially as their anonymity will be protected by law."
The investigation will cover the conduct of Tesco plc from June 25 2013 to February 5 this year and will include in particular, but not be limited to, delay in payments associated with:
- Short deliveries, including imposition of penalties
- Consumer complaints where the amounts were not agreed
- Invoicing discrepancies such as duplicate invoicing where two invoices were issued for the same product
- Deductions for unknown or un-agreed items
- Deductions for promotional fixed costs (gate fees) that were incorrect
- Deductions in relation to historic promotions which had not been agreed.
At this stage the investigation will focus on Tesco plc only but could be extended to other retailers
Tacon said: "This is the first investigation I have launched and it is a significant step for the GCA. I have taken this decision after careful consideration of all the information submitted to me so far. I have applied the GCA published prioritisation principles to each of the practices under consideration and have evidence that they were not isolated incidents, each involving a number of suppliers and significant sums of money."
A Tesco spokesman 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 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 co-operate fully with the GCA as she carries out her investigation and welcome the opportunity for our suppliers to provide direct feedback."
The role of the Adjudicator was set up in 2013 to regulate the relationship between the 10 largest retailers and their
suppliers.
The investigation, the first to be held, is expected to take up to nine months and the Adjudicator has called for evidence to be submitted by 3 April.