Probe launched into Co-op delistings and charges

Groceries Code Adjudicator Christine Tacon has started an investigation into the Co-operative Group over delistings and the introduction of quality control charges.

Tacon said there was a “reasonable suspicion” that the retailer may have broken the Groceries Supply Code of Practice, and is calling on suppliers to submit evidence in the next two months so she can decide if this is the case and what further action to take.

She added that the investigation was necessary to understand the extent to which the Code may have been broken, the causes of the issues and the impact on suppliers.

In response, the Co-op Group said it acknowledged it had “fallen short”, adding that it had been “discussing the two issues raised with the Groceries Code Adjudicator (GCA) for some months”.

The retailer said it had already taken steps to ensure fair treatment of all its suppliers, and had refunded £500,000 in charges (see below).

The GCA’s investigation is to focus on two areas of the code:

  • Paragraph 16: Duties in relation to delisting
  • Paragraph 3: Variation of supply agreements and terms of supply.

When considering issues, the GCA will also be looking at Paragraph 2 of the Code: Principle of fair dealing.

The GCA investigation will consider the scale and impact of practices that may have resulted in suppliers being delisted with no, or short, fixed-notice periods “without due consideration of published GCA delisting guidance”.

While the focus of the investigation is a range reset called ‘Right Range; Right Store’, which took place between summer 2016 and summer 2017, it will not be limited to this.

The investigation will also look at the introduction of charges to suppliers for depot quality control and benchmarking, especially to suppliers with fixed-cost contracts.

The GCA will look at the retailer’s code-related training for its buyers and its culture.

“I have previously escalated my concerns with the Co-op as part of my published collaborative approach,” said Tacon. “However, after carefully considering all the information submitted to me, I have decided an investigation is necessary, so I can fully understand the extent to which the code may have been broken and the root causes.

“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.”

Suppliers are asked to submit evidence by 4pm on 3 May 2018.

The Co-op response:

In a statement, the Co-op said it acknowledged that “we have fallen short and have been discussing the two issues raised with the GCA for some months. We have already taken decisive steps in line with our commitment to ensure the fair treatment of all of our suppliers.”

The retailer said action had included:

  • Steps to strengthen its systems and processes
  • Retraining of 450 commercial staff in the operation of the Groceries Supply Code of Practice
  • Writing to 1,500 direct suppliers to seek information on delisting decisions they believe may have been taken without appropriate consultation. A small number of suppliers have raised concerns.
  • Reviewing all cases where a supplier was charged for benchmarking and quality control. As a result, 110 suppliers have been refunded a total of approximately £500,000.

 “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,” said Jo Whitfield, CEO of Co-op Food.

“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.”

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