The Co-op has been ordered to make major changes to its 'governance and processes' after it was found to have breached the Supply Code of Practice on two counts.
The retailer has been ordered to introduce major changes after the Groceries Code Adjudicator (GCA) carried out a formal investigation.
The Co-op 'failed to provide reasonable notice to suppliers of decisions to de-list products and varied supply agreements unilaterally and without reasonable notice in the way it applied two specific charges'.
Christine Tacon, the current GCA, launched the investigation on 8 March 2018 after an 18-month period of significant engagement with Co-op.
During this time, the retailer accepted it was unable to get to the bottom of issues and could not demonstrate that it had taken remedial action in all the relevant circumstances.
In reaching her findings Ms Tacon interviewed a broad cross-section of Co-op suppliers as well as employees of the retailer and examined documents provided by the Co-op and suppliers.
She found that the retailer de-listed suppliers with no notice or short, fixed notice periods that were 'not reasonable' in the circumstances.
It applied standard notice periods which was contrary to the Code, which specify that notice of de-listing should be considered on a case-by-case basis.
The retailer’s conduct in introducing depot quality control charges and benchmarking charges also breached the Code and the Adjudicator found this caused particular difficulties for suppliers with fixed-cost contracts as they would not be able to amend their cost prices to reflect the increased cost incurred when Co-op applied the charges.
There were also weaknesses in training, policies and processes for buyers and the 'poor functioning' of existing IT systems contributed to the retailer’s Code breaches.
Ms Tacon said: “Systems, processes, business practices and the ability of different parts of the retailer to affect suppliers’ risks and costs of trading with the company all contributed to Co-op breaking the Code.
“The clear conclusion is that Co-op needs to take a very different approach to Code compliance. I have made robust recommendations for urgent action and I will be helping the retailer change its approach by monitoring closely how they implement those recommendations.”
The Adjudicator has set down five recommendations for the Co-op to follow:
• Co-op must have adequate governance to oversee and manage its compliance with the Code;
• Legal, compliance and audit functions must have sufficient co-ordinated oversight of Co-op systems to ensure Code compliance;
• Co-op IT systems must support Code compliance;
• Co-op must adequately train on the Code all employees who make decisions which affect a supplier’s commercial arrangements with it; and
• Co-op must in any potential de-listing situation communicate with affected suppliers to enable the retailer to decide what is a significant reduction in volume and reasonable notice.
• The Adjudicator will monitor Co-op’s delivery against each of the recommendations and has requested an implementation plan within 4 weeks.
