The Adjudicator shows its teeth – to those it’s meant to protect

The Groceries Code Adjudicator, Christine Tacon, has, according to The Grocer, written to a number of suppliers requiring them to provide information to assist in its investigation into Tesco’s alleged breaches of GSCOP.

The Adjudicator has the power to require any person to provide documents or information in their possession or control. That can mean providing information orally.

This is a curious move and may indicate that the Adjudicator does not have enough evidence to demonstrate that Tesco has breached GSCOP or that it is attempting to establish that breaches are continuing long after her power to fine retailers came into force in March.

But, there is a problem with this strategy. The Adjudicator is meant to be helping suppliers, not forcing them to provide information against their will. Slightly less than one in ten suppliers responded to the Adjudicator’s 2015 GSCOP survey. 75% of those who responded supplied Tesco and 68% said that they did not raise an issue with the Adjudicator because of their fear of retribution. Put simply, suppliers do not want to report their biggest customers to a regulator.

At this early stage in the Adjudicator’s existence, the Adjudicator needs to persuade suppliers that it is on their side and can help them. The Adjudicator can help, but I am not convinced the right way to go about it is requiring the suppliers it is there to protect to provide information under threat of criminal proceedings. For me, that is not the right move when the Adjudicator has done so little to change the retailer’s behaviour since it was established.

The only way I can see this move helping the Adjudicator is if, with the information it gathers from this exercise, it is able to prove Tesco has breached GSCOP and the Adjudicator imposes a significant financial penalty. To do that, the Adjudicator would need to show there were serious breaches of GSCOP after March 2015. On that point, it is also worth saying that Tesco are apparently moving to front margin which provides suppliers with more cost certainty; well, at least until the trading year is coming to an end and the buyers start looking at how the supply agreement has panned out. The test then, for front margin and Dave Lewis’ ‘Project Reset’, may be better set for the new year – when retailers’ trading years generally conclude and buyers start looking at their margins and calling suppliers ahead of the next trading year.

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.