Decision

Annexes

Published 25 March 2019

Annex A - The Groceries Supply Code of Practice

The Groceries Supply Code of Practice

Annex B - Notice of Investigation

GCA statutory responsibilities

1. The role of the Groceries Code Adjudicator (GCA) conferred upon it by the Groceries Code Adjudicator Act 2013 (the Act), is to enforce the Groceries Supply Code of Practice (the Code) and to encourage and monitor compliance with it.

2. The Code applies to Aldi Stores Limited, Asda Stores Limited, Co-operative Group Limited, Iceland Foods Limited, Lidl UK GmbH, Marks & Spencer plc, Wm Morrison Supermarkets plc, J Sainsbury plc, Tesco plc, and Waitrose Limited.

GCA decision to launch investigation

The GCA has considered information submitted to it and has made an assessment of that information in line with the published Statutory guidance on how the Groceries Code Adjudicator will carry out investigation and enforcement functions.

The GCA holds a reasonable suspicion that the Code has been broken by Co-operative Group Limited by some of its practices in relation to De-listing and the introduction of benchmarking and depot quality control charges, from early 2016 to at least summer 2017.

The GCA has escalated its concerns in accordance with its published collaborative approach to regulation. There has been a period of intense engagement in which Co-operative Group Limited has accepted that it has fallen short of the expectations of the GCA. The GCA has decided that an investigation is necessary to fully understand the extent to which the Code may have been broken, the impact on suppliers of Co-operative Group Limited’s conduct and the root causes of the issues.

The GCA has applied its published prioritisation principles to each of the practices under consideration and is satisfied that it would be proportionate in all the circumstances to investigate.

Accordingly, the GCA is launching an investigation into the conduct of Co-operative Group Limited under the following provisions of the Code:

1. De-listing: paragraph 16 of the Code (Duties in relation to De-listing) read with paragraph 2 (Principle of fair dealing)

Prior to De-listing a Supplier, a Retailer must:

• provide Reasonable Notice to the Supplier of the Retailer’s decision to De-list.

2. Variation of Supply Agreements: paragraph 3 of the Code (Variation of Supply Agreements and terms of supply) read with paragraph 2 (Principle of fair dealing)

If a Retailer has the right to vary a Supply Agreement unilaterally, it must give Reasonable Notice of any such variation to the Supplier.

Paragraph 2 of the Code says: A Retailer must at all times deal with its Suppliers fairly and lawfully. Fair and lawful dealing will be understood as requiring the Retailer to conduct its trading relationships with Suppliers in good faith, without distinction between formal or informal arrangements, without duress and in recognition of the Suppliers’ need for certainty as regards the risks and costs of trading, particularly in relation to production, delivery and payment issues.

Investigation scope

The investigation will consider the extent, scale and impact of practices which may have resulted in De-listing decisions being issued with no, or short, fixed notice periods, unilaterally imposed by Co-operative Group Limited without due consideration of published GCA De-listing guidance. This will include in particular, but not be limited to De-listing decisions issued between summer 2016 and summer 2017 as part of a project called “Right Range; Right Store”.

The investigation will also consider the extent, scale and impact of practices which may have resulted in the introduction without reasonable notice of charges to suppliers. This will include in particular, but not be limited to the introduction of depot quality control and benchmarking charges to suppliers, especially those with fixed cost contracts. In order fully to understand the factors contributing to the conduct being investigated, the GCA will also consider the quality of Co-operative Group Limited Code-related training for its buyers and the culture contributing to the retailer’s approach to Code compliance at the relevant time.

Retailers to be investigated

The investigation will focus on Co-operative Group Limited and will not extend to other designated retailers. If during the course of the investigation evidence is presented to the GCA which indicates that the same practices have been carried out by other designated retailers, consideration will be given to what action would then be appropriate for the GCA to take in respect of them, in line with published GCA guidance including its prioritisation principles.

Investigation review time period

The investigation will consider the conduct of Co-operative Group Limited from January 2016 to 8 March 2018, the date of this notice. The main focus will be on the period between summer 2016 and summer 2017, when the “Right Range; Right Store” programme was underway.

Call for evidence

The GCA accordingly calls for evidence relevant to its determination of whether Co-operative Group Limited has broken paragraphs 16 and 3 of the Code in the ways described in this notice, and of the effect that has had on suppliers.

The deadline for submission of evidence is 4pm on 3 May 2018. Submissions may be made on paper or in electronic form.

Evidence should be submitted to the GCA at: $ Groceries Code Adjudicator 2nd Floor Victoria House Southampton Row London WC1B 4DA $

E-mail to: enquiries@gca.gsi.gov.uk

All suppliers who have previously contacted the GCA directly with information about the practices under investigation will be contacted by the GCA before 4pm on 3 May 2018 for more information.

The anonymity of all those providing information will be preserved and no individual or business will be identified without their consent.

8 March 2018