Decision

Introduction

Published 25 March 2019

1. The Groceries Code Adjudicator and my role as GCA

1.1 The office of the Groceries Code Adjudicator (GCA) was established by the Groceries Code Adjudicator Act 2013 (the Act). I was appointed as GCA designate on 21 January 2013 and formally took office when the Act came into force on 25 June 2013. Following a government review of my performance in October 2016 which was required by the Act, my re-appointment as GCA was announced on 26 June 2017. My role is to enforce the Groceries Supply Code of Practice (the Code) and to encourage and monitor compliance with it. The Code is annexed to this report as Annex A. The purpose of the Code is to ensure that the UK’s largest supermarkets treat their direct Suppliers fairly. The Code is set out in Schedule 1 to the Groceries (Supply Chain Practices) Market Investigation Order 2009 (the Order). The Code was developed from the Supermarket Code of Practice, which was initially introduced as a non-statutory code in 2002.

1.2 The Code applies to all retailers with UK annual groceries turnover exceeding £1 billion that are designated in Schedule 2 to the Order. At the date this investigation was launched, the Code applied 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 (the Retailers). The Code applies to the Retailers’ dealings with their direct groceries Suppliers, whether based in the UK or elsewhere, in relation to the supply of groceries for resale in the UK.

2. My legislative powers and statutory guidance in relation to investigations

2.1 The Act provides me with the power to undertake investigations into the Retailers where I have reasonable grounds to suspect that a Retailer has broken the Code. In December 2013 I published my Statutory guidance on how the Groceries Code Adjudicator will carry out investigations and enforcement functions (the Guidance). This was reissued in April 2016. It explains the process I will follow both when deciding whether to launch an investigation and during the course of an investigation.

2.2 The Guidance also sets out how I will apply the enforcement powers given to me under the Act. The enforcement powers available to me are to make recommendations, to require information to be published and to impose financial penalties. The power to issue a financial penalty was brought into effect by the Groceries Code Adjudicator (Permitted Maximum Financial Penalty) Order 2015 (the Financial Penalties Order). This provides for a maximum level of fine of 1% of the relevant Retailer’s annual UK turnover where a breach of the Code is found to have occurred after 6 April 2015.

3. My investigation and report into Co-operative Group Limited

3.1 On 8 March 2018 I announced that I would be commencing an investigation into Co-operative Group Limited (Co-op). Independent co-operative societies are not part of the regulated business of Co-op. The Notice of Investigation which was published when I made my announcement is annexed to this report as Annex B. The investigation was to consider the extent, scale and impact of practices which may have resulted in De-listing decisions being issued by Co-op with no, or short, fixed notice periods. De-listing is where a Retailer ceases to purchase groceries for resale from a Supplier, or significantly reduces the volume of purchases made from that Supplier. The investigation was also to consider the extent, scale and impact of practices which may have resulted in the introduction without reasonable notice of charges to Suppliers. The period under investigation is from January 2016 to 8 March 2018. The relevant provisions of the Code are paragraphs 16 (Duties in relation to De-listing) and 3 (Variation of Supply Agreements and terms of supply), read with paragraph 2 (Principle of fair dealing).

3.2 I have now concluded my investigation. This report sets out the investigation process I undertook, the findings from the investigation and my decision about any enforcement action to be undertaken.

3.3 Under the Act I may decide not to make public the name of the Retailer or Retailers under investigation. In this instance I decided that it was necessary to name the Retailer to enable Suppliers and others to decide whether or not they held information which might be relevant to my investigation.

3.4 I have not made any substantive public statements during the course of the investigation.

3.5 As Co-op is named in the report, it has been given a reasonable opportunity to comment on a draft of this report before publication.