Probe means the Co-op faces reputational damage – but will it get a fine to match?

There were plenty of doubters who thought we would never see another official investigation by Groceries Code Adjudicator Christine Tacon.

Not since the aftermath of the 2014 Tesco scandal has the Adjudicator bared her teeth. And back then, the dossier of evidence against the supermarket giant was based largely on what was handed over by Tesco itself.

Even then, as the cynics quite rightly pointed out, Tacon was unable to hit Tesco where it really hurts, with the investigation coming before she gained her powers to fine.

Since then Tacon has largely refrained from the big stick. Instead she has pursued a quietly effective policy based on nudge tactics – a raft of best guidance reviews, surveys and clarifications, pushing retailers’ behaviour in the right direction.

Yet today Tacon proved the cynics wrong, temporarily at least, by going into official “investigation mode” once more. And this time, bosses at the Co-op lack the protection Tesco had from the potential financial consequences – let alone the reputational ones.

What is already alarmingly clear is that once again suppliers have become the victim of unacceptable behaviour from retailers, who put them in the firing line when they try to turn around their struggling businesses through range reviews.

Last year, Asda managed to avoid a formal investigation after a probe by Tacon found it demanded suppliers pay millions towards its now-defunct Project Renewal strategy – or face the threat of delisting.

Asda escaped because, says Tacon, it had acted quickly to put its house in order, though many suppliers privately believe it got off lightly.

Now we see the same pattern of behaviour emerge again. There is, of course, a great irony that it should now be the Co-op, a retailer that has put its ethical behaviour at the very centre of its so far successful fightback strategy, that is the guilty party.

’High standards’

And guilty it is, whatever the outcome of the Adjudicator’s investigation. Because today Co-op boss Jo Whitfield has already held up her hands, offering an apology to suppliers and admitting it has already handed back more than £500,000 to more than 100 of them, after it “ failed to live up to our usual high standards”.

While the general public tends to care less about food and drink suppliers than issues such as Fairtrade, British-sourced meat or raising money for local communities, today’s revelations, whatever the eventual outcome, raise worrying questions about the Co-op’s conduct. Its reputation will be damaged, without doubt.

But why should The Co-op face a full investigation where Asda escaped?

The fact is that Tacon believes she has not “got to the bottom” to the extent of the Code breaches at the retailer.

The Co-op’s assurances that it has retrained 450 of its buyers and is writing to 1,500 direct suppliers to seek information about delisting decisions itself carries a clue.

Why would it write to suppliers asking for information if it knew exactly what had happened and had been able to sort the problems out?

And if you are one of those suppliers, especially one with a large amount of business at stake through listings, are you really going to write back giving it to the Co-op with both barrels?

Now Tacon’s biggest task is to try to convince suppliers they can trust her to treat their evidence in confidence.

Deadline

As with the Tesco case, Tacon has already come out and said that she would be prepared to force suppliers to give evidence against the Co-op, if they fail to give her sufficient information come the new 3 May deadline.

It will be fascinating to see whether suppliers come forward voluntarily, or through being dragged by the scruff of the necks.

The investigation will focus on Paragraph 16 of the Code (Duties in relation to De-listing); Paragraph three (Variation of Supply Agreements and terms of supply) and also elements of Paragraph two (Principle of fair dealing).

But the outcome surely hinges not on whether these areas were breached, but how systematic the process was.

In the case of Tesco, the dossier at Tacon’s disposal left her in no doubt that the retailer had gained financially via whole-scale abuses of its suppliers.

On the basis of the evidence seen so far, that is as yet far from proven to be the case at the Co-op.

And while there will no doubt be plenty of talk about the potential for its being fined 1% of annual turnover, it’s important to note the sliding scale of fines at Tacon’s fingertips starts at precisely nought.

Only once suppliers come forward, voluntarily or not, will we know whether the Co-op’s coffers will be dented for the way it has treated suppliers.