Co-op could not assume that suppliers knew about changes to its charges simply because they kept using its online portal, Britain’s Groceries Code Adjudicator found in a report published on March 25, 2019. The retailer had broken the Groceries Supply Code of Practice by applying depot quality-control and product-benchmarking charges without reasonable notice. For suppliers whose selling prices were fixed by contract, the deductions created costs they could not simply pass back through a higher price. [S1][S4]
For a supplier on fixed-price terms, advance warning alone might not provide an opportunity to recover the cost. The adjudicator said that, where a retailer can change a supply agreement unilaterally, reasonable notice depends on the terms and on when the supplier next has an opportunity to renegotiate. A clause allowing price changes for currency or commodity movements did not necessarily let a supplier adjust its price to cover new charges. [S1]
Co-op told the investigation that it communicated changes by updating documents on its supplier portal, including its charges matrix. Some suppliers reported receiving alerts. Others said they had received no notification or could not open the document. The findings also recorded that junior employees routinely used the portal while the people negotiating commercial terms might not have access or log in regularly. [S1]
The information problem ran inside Co-op as well. Depot charges came from a logistics function separate from the commercial team, and buyers lacked access to information handled through a separate financial service centre. The product-benchmarking team also appeared not to involve buyers when choosing products for testing; some buyers could not access the charges matrix themselves. The adjudicator found that buyers did not know the likely amounts of the charges and could not give notice of them. A supplier-facing notification process therefore depended on information reaching the buyer from the teams applying the charges. [S1]
The charge categories affected different groups: the notice failures over depot quality control involved fresh-produce and meat suppliers, while those over benchmarking affected own-label suppliers. The financial effects were mixed. Some suppliers regarded the charges as routine business costs or too small to challenge; others described a more serious burden. The investigation also found that checking records and contesting deductions diverted some suppliers’ employees from other work. [S1]
The enforcement response covered both the charge failures and a separate finding that Co-op had failed to give reasonable notice of delisting. The adjudicator required changes to governance, IT and staff training, among five recommendations, and requested an implementation plan within four weeks. She chose not to impose a fine, but said Co-op would pay the investigation and monitoring costs. She also said Co-op had already repaid the suppliers it had identified as having charges introduced without sufficient notice. [S4]
Source documents
- Findings from the GCA investigation into Co-operative Group Limitedhttps://www.gov.uk/government/publications/gca-investigation-report-into-co-operative-group-limited/findings-from-the-gca-investigation
- Co-op Breached Code finds Groceries Code Adjudicatorhttps://www.gov.uk/government/news/co-op-breached-code-finds-groceries-code-adjudicator