More bad news for Tesco to come

There have been better times for Tesco. Things seem to go from bad to worse.

First, the retail giant began to lose market share. Next came the SFO investigation, quickly followed by the Groceries Code Adjudicator announcing that she was going to investigate Tesco’s practices. Then came the £6.4 billion loss, the sixth biggest in British corporate history – ouch! That’s after a £2.26 billion profit a year earlier. It’s been a bad 12 months for Tesco, as if the business has had its heyday and is now a sinking ship.

And yet, there could be more to come. Financial commentators have said that Dave Lewis, Tesco’s chief executive, was “kitchen-sinking”, in other words, getting rid of everything bad in the business in one go. But the Groceries Code Adjudicator has still not concluded her investigation. The deadline for evidence from suppliers was 5 April 2015. So, we have to expect that the Adjudicator will soon decide whether Tesco treats suppliers contrary to the law and in breach of the Groceries Supply Code of Practice.

“Ah hah”, you might say, “the Adjudicator can’t fine anyone yet, she doesn’t have the power and when she gets it, it won’t be retrospective. In other words, Tesco will get off”. Not so. The Adjudicator has a number of powers. She can make recommendations and require a retailer to publish information. The Adjudicator can say what is to be published, how it is to be published and by when. On top of that, she can recover her investigation costs. And, it is understood, the Adjudicator uses the levy she imposes on retailers to pay an expensive London firm to do her job for her.

So, if Tesco is found to have breached the code, we might find that they are ordered to make a very public apology and pay significant investigation costs. More bad news to come? Tesco could be expecting it.

 For more information in relation to GSCOP or supply contracts, contact our Retail experts, Mark Jones on 0113 227 0297 or at mark.jones@gordonsllp.com or Andy Brian on 0113 227 0354 or at andy.brian@gordonsllp.com.