The Groceries Code Adjudicator has opened an investigation into the Co-op amid suspicions the retailer may have broken the code of practice.
Adjudicator Christine Tacon says she "holds a reasonable suspicion" that the Co-op may have broken the Groceries Supply Code of Practice in relation to delisting and the introduction of benchmarking and depot quality control charges over a period from early 2016 to at least summer 2017.
The investigation will focus on paragraph 16 of the code, which covers duties in relation to delisting; paragraph 3, which is about variation of supply agreements and terms of supply; and paragraph 2, which is centred on the principle of fair dealing.
Specifically, the investigation will consider the extent, scale and impact of practices which may have resulted in suppliers being delisted with no, or short, fixed notice periods unilaterally imposed by the Co-op without due consideration of published GCA delisting guidance. The focus will be in relation but not limited to decisions taken between summer 2016 and summer 2017 as part of a project called ‘Right Range; Right Store’.
The investigation will also consider the extent, scale and impact of practices which may have resulted in the introduction of charges without reasonable notice to suppliers. This will include, but not be limited to, the introduction of depot quality control and benchmarking charges to suppliers, especially those with fixed-cost contracts.
In addition, the adjudicator's office will consider the retailer’s code-related training for its buyers and the culture contributing to the retailer’s approach to code compliance.
Tacon said she made her decision after escalating her concerns with the Co-op, in line with her collaborative approach to regulation. “However, after carefully considering all the information submitted to me, I have decided that an investigation is necessary so I can fully understand the extent to which the code may have been broken and the root causes of the issues that have been raised with me," she explained.
“It is now important that suppliers provide me with information to help my investigation. I am looking forward to hearing what they have to say about whether they have experienced any of the issues now being investigated and if so, the impact on them of the Co-op’s conduct. All information I receive will be treated with complete confidentiality.”
In response to Tacon's announcement, the Co-op acknowledged it had "fallen short", adding it has been discussing the two issues raised with the GCA for several months. It pointed out it has already taken a number of steps to improve its practices, including:
- Steps to strengthen systems and processes for the future
- Retraining 450 commercial colleagues in the operation of the Groceries Supply Code of Practice
- Writing to all of its 1,500 direct suppliers to seek information on any delisting decisions that they believe may have been taken without appropriate consultation. A small number of suppliers raised concerns, which the Co-op says it is working through with them
- Reviewing every case where a supplier was charged for benchmarking and quality control. As a result 110 suppliers have been refunded a total of approximately £500,000, the Co-op said
Jo Whitfield, chief executive of Co-op Food, added: “We care deeply about our relationships with our suppliers and we are very sorry that in these two areas we have failed to live up to our usual high standards. We are already addressing the issues with the GCA and our suppliers and we hope the investigation will help bring to light any additional cases so that we can put these right as quickly as possible.”
Tacon previously concluded an investigation into Tesco in January 2016, uncovering what was described as a serious breach. At the time the adjudicator did not have the power to fine supermarkets, so instead made a number of recommendations for the retailer to improve its practices.