The Groceries Code Adjudicator’s Annual Report – Interesting Points
Wednesday 19th August 2015
So, I wrote about the issues the Groceries Code Adjudicator (‘GCA’/’Adjudicator’) had on her hit list moving forward recently (click here to read the related article) but I also spotted some interesting points for those keen on the subject matter, tucked away in the report. For instance:
- The GCA intends to continue with her light touch approach when enforcing the Groceries Supply Code of Practice (‘GSCOP’ or the ‘Code’). That is to say that she intends to find out how retailers operate and if she is not happy with such practices, the GCA will ask them to change. If they don’t, well, she’ll enforce the Code. She admits, however, that the adopted approach “may not be consistent with the Code”, which is an interesting statement to make, but if she is to encourage the collaborative approach GCA craves, she cannot alienate the retailers just yet.
- She is seeing retailers focusing on front end margin rather than back end margin (which I mentioned in an article about the Which? super complaint, click here to read the article). So changes may be a foot in relation to how retailers and suppliers structure their commercial agreements.
- The GCA is still deciding whether there is evidence to demonstrate Tesco breached the Code and what further information she requires from Tesco. This is of particular interest because you may recall the GCA survey results indicated that 31% of the suppliers who responded to the survey, and supplied Tesco, said the retailer either rarely or never complied with GSCOP. Also of interest is the GCA’s statement that if she discovers evidence of Tesco breaching the Code after 6 April 2015, when the GCA obtained the power to fine retailers, she will need to decide whether a fine is appropriate. Even if the Adjudicator decides not to fine Tesco, assuming a breach of the Code is established, the accounts show £167k arising from inquiry and legal costs. It is not clear how much of that relates to the Tesco investigation but I imagine a big chunk of it will. And remember, costs are recoverable when a breach of GSCOP is established.
- The GCA has overseen two arbitrations in the last year. So not many given there are around 10,000 suppliers who supply 10 retailers.
- The GCA’s costs have risen from £302k in 2014 to £683k in 2015.
So, good news for retailers and suppliers. The GCA is unlikely to launch too many investigations and, if the industry is moving to front end margin, suppliers should get more cost and risk certainty. One sore point, however, is the rising costs of the Adjudicator. Even if a large part of the last years costs relate to the Tesco investigation, costs seem to be heading in one direction, and it’s not down.
For more information in relation to GSCOP or supply contracts, contact our Retail experts, Mark Jones on 0113 227 0297 or at firstname.lastname@example.org or Andy Brian on 0113 227 0354 or at email@example.com.