Grocery Code Adjudicator gives stamp of approval to Co-op turnaround

The Groceries Code Adjudicator (GCA) has published an update on the progress made by the Co-operative Group Limited (Co-op) towards following the recommendations set out in the investigation report. For all 5 recommendations it has been considered that the Co-op has adopted an appropriate approach.

Recommendation 1: Co-op must have adequate governance to oversee and manage its compliance with the Code.
[GCA view: "I consider that Co-op has an appropriate approach to following this recommendation".]

Recommendation 2: Co-op legal, compliance and audit functions must have sufficient co-ordinated oversight of Co-op systems to ensure Code compliance.
[GCA view: "I consider that Co-op has an appropriate approach to following this recommendation".]

Recommendation 3: Co-op IT systems must support Code compliance.
[GCA view: "I consider that Co-op has an appropriate approach to following this recommendation".]

Recommendation 4: Co-op must adequately train on the Code all employees who make decisions which affect a Supplier’s commercial arrangements with Co-op.
[GCA view: "I consider that Co-op has an appropriate approach to following this recommendation".]

Recommendation 5: Co-op must in any potential De-listing situation communicate with affected Suppliers to enable Co-op to decide what is a significant reduction in volume and reasonable notice.
[GCA view: "I consider that Co-op has an appropriate approach to following this recommendation".]

The Co-op provided a detailed implementation plan within four weeks of the publication of the investigation report setting out how it would comply with recommendations. The GCA has now moved from a quarterly review of the Co-op to ‘business as usual.’

GCA background:

The role of the GCA is to enforce the Groceries Supply Code of Practice (“the Code”) The Code sets out how such grocery retailers should treat their suppliers and aims to make sure that they do not abuse their commercial power. For example, retailers bound by the Code cannot make changes to the terms of supply retrospectively and must provide notice of and reasons for no longer using a supplier. The Code was created in 2009 following an investigation by the Competition and Market Authority’s (CMA) predecessor, the Competition Commission (CC). The CC investigated the supply of groceries in the UK and found that some suppliers of larger retailers were being treated unfairly. This meant suppliers were less likely to innovate and invest, leading to less choice and availability for customers.

The Code applies to the “Designated Retailers”. As “large retailers” these are retailers with a turnover of more than £1 billion with respect to the retail supply of groceries in the UK. The Code applies to the large retailers based in the UK and their dealings with their direct suppliers.  Retailers subject to the Code are: Asda Stores Limited, Co-operative Group Limited, Marks & Spencer PLC, Wm Morrison Supermarkets PLC, J Sainsbury PLC, Tesco PLC, Waitrose Limited, Aldi Stores Limited, Iceland Foods Limited, and Lidl UK GmbH.  Ocado and B&M Homestores were added to this list in November 2018.

In brief, the Code obliges the large retailers:

  1. to deal fairly and lawfully with their suppliers;
  2. not to vary supply agreements retrospectively, except in circumstances beyond the large retailer’s control which are clearly set out in the supply agreement;
  3. to pay suppliers within a reasonable time;
  4. not to seek contributions to marketing costs unless this is provided for in the relevant Supply Agreement;
  5. not to seek compensation for shrinkage;
  6. not to seek payments for wastage except in limited circumstances;
  7. not to charge listing fees, except in limited circumstances;
  8. to compensate suppliers for forecasting errors;
  9. except in limited circumstances, not to tell suppliers which third party suppliers to use;
  10. not to charge position payments unless they relate to a promotion;
  11. not to require suppliers predominantly to fund promotions;
  12. not to over-order at promotional prices;
  13. not to require suppliers to make unjustified payments for consumer complaints; and
  14. to de-list suppliers only for genuine commercial reasons and give reasonable notice of, and opportunity to, discuss delisting with the large retailer’s Code Compliance Officer.

The Adjudicator’s statutory functions are to:

  • provide advice and issue guidance to both suppliers and large retailers on matters relating to the Code;
  • arbitrate, where requested, in disputes between suppliers and large retailers;
  • investigate suspected breaches of the Code based on issues raised and information received;
  • enforce the Code;
  • impose sanctions and other remedies for breaches of the Code; and
  • publish an annual report on the Adjudicator’s activities.

GCA, the future:

Christine Tacon is to step down from her role as the GCA at the end of her current term in June 2020 and a replacement has not yet been announced.  Her tenure has been remarkably successful on the reported statistics. At the GCA conference last year it was announced that for the second year running, only four out of ten suppliers reported having experienced an issue at any point in the year. Forecasting was now the issue most reported by suppliers and that too had continued to decline. At this conference, the Co-op topped the table as the biggest improver after this year-long investigation by the GCA; illustrating the positive impact for suppliers that can be achieved.

For more information or if you have any queries relating to this topic please contact either Richard Dawson-Gerrard Tel: +44 (0) 161 234 8797 (Ext 5797) Richard.Dawson-Gerrard@mills-reeve.com or Rachel Higgs  Tel: +44 (0) 1603 693233 (Ext 3233) Rachel.Higgs@mills-reeve.com

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