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Groceries Code Adjudicator says suppliers must know their rights in contract disputes

PUBLISHED: 08:14 09 May 2015 | UPDATED: 08:14 09 May 2015

Christine Tacon, groceries code adjudicator, the national regulator for supermarkets and the way they deal with suppliers. Picture: DENISE BRADLEY

Christine Tacon, groceries code adjudicator, the national regulator for supermarkets and the way they deal with suppliers. Picture: DENISE BRADLEY

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The nation's supermarket watchdog says suppliers can protect themselves from unfair practices by learning more about how to apply the Groceries Supply Code of Practice.

She is the Norfolk-born businesswoman with the power to fine supermarkets millions of pounds if they fail to live up to their obligations.

But Christine Tacon said her role as the groceries code adjudicator (GCA) is often misunderstood – even by the food producers who the code was created to protect.

In 2013 she became the UK’s first independent adjudicator to ensure the largest retailers treat their direct suppliers lawfully and fairly, to investigate complaints and arbitrate in disputes.

If breaches of the code are proven, she can enforce sanctions including strict recommendations on future actions, “naming and shaming” offenders online or, after new powers come into force in April, fines of up to 1pc of the retailer’s UK turnover.

Ms Tacon said she prefers a “collaborative approach” to resolving issues between aggrieved suppliers and the code compliance officers (CCOs) which each major supermarket is required to employ.

If that fails, she can arbitrate in the dispute and in the most serious cases she can launch a formal investigation – which happened for the first time in September, following a suspected breach by Tesco, focusing on the provisions of the code relating to “no delay in payments” and “no payments for better positioning of goods”.

But she said her biggest challenge was to inspire a cultural change – including getting suppliers to learn more about their rights and how to report suspected unfair practices.

Ms Tacon on cultural change:

“The job I have got at the moment is a really big one, trying to change the culture and getting the supplier to step up to the plate and learn about it.

“Although the retailers understand the code, there are a lot of suppliers who do not – and this is something that has been created to protect them.

“I have been trying to say to suppliers that it is all about how they use the code intelligently. If you are asked about something which is a breach of the code, you don’t need to go with all guns blazing straight away. You can be more subtle.

“The CCOs are there to protect the business’s reputation and stop them breaking the law. Some retailers say that if there is a concern raised that even mentions the code, the buyer should stop the meeting straight away and get the CCO involved. They are very worried about the consequences of breaching it.

“The CCOs, the directors and the board need to know what their responsibilities are, and that is not just a matter of training. It is a matter of culture.

“When I did my first supplier survey last year a high percentage of people said they would not tell me if they thought the code was being breached. We asked why and 58pc said they feared retribution. They fear that the retailer would find out that they had complained and as a result they would lose their business. I have been at great pains to point out that I have a legal duty to protect the source of that information. That is why the survey has been run independently by YouGov.

“There are always a number of people who say things to me about a ‘certain retailer’. If you are not a big brand supplier, 40pc of your business could easily be with one retailer. So it is a natural thing.”

What type of breaches are reported?

“What I often hear about is people being paid on time, but less deductions. And I am concerned about the deductions which have not been agreed with the supplier. So, the supplier says they have sent 5,000 units and the retailer says ‘you were 100 short’, and docks the payment for 100 items.

“Another one I have heard is duplicate invoices where a retailer can legitimately deduct money that has been agreed for a promotion, but they deduct it twice, and then it takes six months to sort out.

“There are 15 points in the code, and ‘no delay in payments’ is just one of them. Another is not over-charging on customer complaints. Another one is not requiring suppliers to use third-party suppliers where the supplier could have got it cheaper elsewhere. Then we have situations where forecasts have been wrong, so when the order didn’t hit the forecast the suppliers were fined for not reaching it.

“It is really just looking at the areas where the retailers are using the fact that they are the bigger player, to extract money from suppliers which was not agreed in the original supplier agreement. I am trying to get it so the supplier knows what is happening and it is all agreed up front.”

The “collaborative approach”.

“Since the beginning, I have been working on what I call a collaborative approach.

“I have been meeting regularly with the CCOs, individually and all together, and they are reporting back to me on their progress.

“I am dealing with these people on the basis that I have heard someone say that they may be breaking the law, so I would expect them to do something about it and I am getting a lot of feedback from suppliers that things are getting better.

“No-one is saying it is easy, but the fact that there are some improvements shows that this approach is making a difference. It is a cultural thing.

“I have come across breaches of the code and I have written them up as case studies on my website (they feature Tesco, Morrisons and Co-Op) but what I have said to all my CCOs is the first time I come across a breach of the code I will tell you about it and give you the chance to put it right.

“The code needs a lot if interpretation, so the case studies help people understand where I am coming from. I am not doing it to get funds for the treasury’s coffers, I am doing it to get a more productive industry.

“With my background, my frustrations with the efficiency of the supply chain were always there, and I see this as a way to improve the supply chain. We have got one of the most brilliant food supply chains in the worlds. It is just not perfect.

“I should also say that within the current investigation, Tesco have been really co-operative and if it leads to recommendations I think it will be helpful for the whole industry.”

Do the GCA’s powers go far enough?

The remit of the GCA’s role has attracted criticism among some farming groups over the extent of its powers, particularly in relation to pricing transparency and for failing to protect farmers who are not covered by the code because they are indirect suppliers.

The GCA’s defined remit is to ensure the UK’s 10 biggest grocery retailers adhere to the Grocery Code of Practice, which sets out what they can and can’t do when dealing with their direct suppliers.

Ms Tacon said: “Although the retailers understand the code, there are a lot of suppliers who do not. There are a lot of people who have an idea what they would like my job to be but it is a legally defined role.

“A lot of people seem to want me to get involved in pricing – but the code has got nothing to do with price. It is about sticking to your supplier agreements.”

Since April, the GCA has been given the power to fine supermarkets up to 1pc of their annual UK turnover for unfair practices when dealing with suppliers.

She said: “That could be a very large sum. But the retailers have said all along that they feel I didn’t need to have a financial penalty in my armoury, because the damage to their reputation meant far more to them.”

Ms Tacon’s CV

Christine Tacon was born in Eye and grew up in Norwich.

She is a chartered engineer with 12 years experience in sales and marketing of fast moving consumer goods with companies such as Mars, Anchor and Vodafone. She also ran the Co-operative Group’s farming business for 11 years until 2012 and was made a CBE for services to agriculture in 2004.

Other current positions include non-executive director of Norfolk-based buying group Anglia Farmers, the Met Office and Ursula Agriculture. She is also a member of Defra’s regulatory challenge panel.

For more details about the Groceries Code Adjudicator, code clarification case studies and the Groceries Supply Code of Practice, click here.

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