The groceries code adjudicator (GCA) has ruled the Co-op breached the Groceries Supply Code of Practice on two counts.
Following a year-long investigation GCA Christine Tacon published a report which found the retailer had failed to provide reasonable notice to suppliers of decisions to de-list products and varied supply agreements without reasonable notice.
Tacon said: “For a number of suppliers, the lack of notice of a significant reduction in orders or removal of a product resulted in them incurring significant costs which might have been avoided had they received reasonable notice.
“In addition, for several suppliers, the short notice given of distribution reductions or product removals resulted in wastage of packaging and products.”
She found the retailer applied standard notice periods which was contrary to the code and guidance which specifies that notice of de-listing should be considered on a case-by-case basis.
Some suppliers were also found to have been charged large quality control charges and benchmarking charges had been applied without reasonable notice. The Co-op has since refunded payments to its suppliers totalling £650,000.
Tacon said while she had not found the actions taken by Co-op to be “malicious”, the practices and behaviours described in the report were widespread. Weaknesses in training, policies and processes for buyers and poor functioning IT systems contributed to the code breach.
“At the core there was inadequate governance to oversee and manage code compliance,” said Tacon.
The report outlined recommendations for the Co-op to follow in order to comply with the code, including adequate governance to oversee and manage compliance, an IT system that supports code compliance and training for all employees who make decisions which affect suppliers' commercial arrangements.
The Co-op must also communicate with its suppliers in any future potential de-listing situation to decide on a significant reduction in volume and a reasonable notice period.
Tacon has requested an implementation programme from the Co-op within four weeks and will monitor its progress on each recommendation.
Jo Whitfield, Co-op’s food chief executive officer, apologised to its suppliers and said: “We’ve gone to great lengths to put these things right and have undertaken a root and branch review of all our supplier dealings.
“We were focused on rescuing the Co-op and doing right by consumers but we should have also given more thought to the potential impact those planned changes would have on our suppliers. It is clear we tried to move more quickly than our systems, processes and people could handle,” she said.
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