Grocery watchdog to sharpen its teeth

For 18 months the woman tasked with policing the practices of Britain's supermarkets has been waiting for a big stick to beat those that abuse their suppliers.

Christine Tacon, the Groceries Code Adjudicator, is now poised to receive her weapon, with legislation tabled in parliament to give her the power to fine Britain's 10 big grocery retailers. This comes despite efforts by the Treasury to water down the penalty.

Ms Tacon says any fine must be big enough to make an impact on the muscular retailers, which have annual sales of more than £1bn.

She says it must act as a deterrent to breaching the Groceries Code, which requires that big food retailers treat suppliers legally and fairly.

"It's my weapon," she says. "It has got to hurt if I use it."

Ms Tacon points to the example of Tesco, which revealed last autumn it overstated profits by £263m by counting early money from suppliers for funding special offers or selling more products.

"You only need to look at the size of Tesco's accounting error to see what kinds of benefits can come," she says, adding that she is considering whether to take any action in relation to Tesco's overstatement.

The legislation comes as suppliers are being increasingly squeezed amid a vicious supermarket price war.

Premier Foods, the maker of Hovis bread, told suppliers recently they could lose their contracts unless they made cash payments. It later backed down.

Other companies, such as Diageo, are asking suppliers to wait longer for payments.

Ms Tacon says there has not been "a huge kick-up" in suppliers reporting breaches to the code, which prevents food retailers engaging in practices such as delaying payments to suppliers, seeking retrospective and lump sum payments and charging suppliers for customer complaints. She is currently arbitrating on two disputes.

"The code does not protect you from a tough negotiation," she says. "It does not protect you from being delisted . . . It does not guarantee you are going to stay in business. The code just makes sure the retailer adheres to a certain way of dealing."

Ms Tacon has also seen extended payment terms, but the code says that suppliers should be paid within a "reasonable time", and that they should be given reasonable notice of changes to supply agreements. Three retailers have been talking to her about extending payment terms, to make sure this complies with the code.

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"I'm much more concerned not about payment terms, but delaying paying people," she says.

"If you give somebody £1m worth of goods, and when you get the money, there is only £950,000 because they have deducted something for this and something for that; that to me is a delay in payment.

"I am much more concerned about that than something where you have had fair notice, when you took a contract, that you are going to be paid in this time."

Ms Tacon's powers also apply only to direct suppliers to supermarkets, not suppliers to suppliers. MPs on the rural affairs committee recently called for the code to be extended to dairy farms, the majority of which do not sell milk direct to supermarkets.

< > "[Dairy farmers] have my sympathy. It's just that it's not something that is covered by the code," Ms Tacon says. "There is not a code in the world that can get involved in the price that a farmer gets paid for its milk."

However, she says that if "somebody came to see me and said I am a direct supplier to the retailer, and my contract has been broken, and here is the evidence, I would take it up instantly".

Ms Tacon believes it would be "wholly inappropriate" to extend her powers further down the supply chain. She argues that by regulating the 10 biggest food retailers, which pay for her office, she can influence conditions throughout the chain.

"In many cases the things that have gone on there, get learned by the suppliers," she says. "At the end of the day, if you are going to sort it out, let's start at the top."

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