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Tesco 'abused its power' to delay and overcharge suppliers

Supermarkets don't come much mightier than Tesco.

The retailer has a scale and reach that, even today, means suppliers will do almost anything to get their stock onto Tesco's shelves.

The imbalance in the relationship is obvious and allegations that Tesco is a retail bully date back years.

In theory, all supermarkets are bound by the Groceries Supply Code of Practice to treat suppliers "fairly and lawfully"; in practice an investigation by The Groceries Code Adjudicator has concluded Tesco did not.

Christine Tacon's team found widespread evidence that Tesco abused its power to delay and overcharge suppliers, often for lengthy periods of time.

Abuses ranged from the careless to the calculated.

Invoices were duplicated and/or contained errors. The amounts involved were in the millions, the delays ran into months and in some cases years.

Suppliers weren't leant on, they were squashed.

For the majority, Tesco accounted for a quarter of their overall business.

One supplier told the GCA it decided to write off the debt it felt it was owed as Tesco gave them the impression that future business was at risk if it was pursued.

The GCA's has told Tesco to change the way it does business but also notes that the "over-whelming majority of suppliers" have reported more positive relationships with Tesco since the arrival of Dave Lewis as chief executive.

Tesco Chief Executive Dave Lewis Credit: PA

The GCA also says there us no evidence that Tesco obliged suppliers to make payments to secure more prominence for their goods in-store and, interestingly, "own-brand" suppliers didn't get roughed-up in quite the same way.

This report makes clear that Tesco "knowingly delayed paying money to suppliers to improve its own financial position" in some cases putting suppliers businesses at risk of running out of cash.

The investigation will ultimately cost Tesco nothing but pride however another, on-going investigation into Tesco's financial relationship with its suppliers may prove more expensive.

In September 2014 Tesco revealed there was a difference between the profits it had been reporting and the money that was passing through the tills. The gap was huge: £326 million.

The Serious Fraud Office is investigating.

Mike Denis of Cantor Fitzgerald said yesterday that he expects the SFO's findings to cost Tesco up to £500 million in fines and compensation. It may also result in criminal proceedings.

Tesco has 3000 suppliers, the supermarket has already acknowledged it has mistreated them in the past.

This morning the chief executive, Dave Lewis, has acknowledged the GCA's findings and publicly apologised.

Lewis admits Tesco's obsession with protecting profits margins damaged the business and insists that today Tesco is a "very different company".

Most of the GCA recommendations have already been implemented and, to be fair, the GCA's own report points to signs of culture change.