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Regulating the retailers

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22 January 2019

In the first week of term in January, we were delighted to welcome Christine Tacon, the UK’s Grocery Code Adjudicator, to give a guest lecture to our food and business students.

This role was created just five years ago and Christine has been the Adjudicator from the beginning. Her job is to police the trading relationships between the UK’s biggest food retailers (currently 12 of them) and their suppliers (currently several thousand in number).

So, you might ask, why do such business dealings need policing? In short, the UK’s biggest food retailers wield tremendous power. The supplier often needs the retailer far more than the retailer needs the supplier. In such cases there was growing evidence that such power was being abused.

The potential threat to withdraw from future business, meant that suppliers often tolerated unfair treatment from their retail customers. When the adjudicator role was created, there was still plenty of scepticism from the industry. Suppliers felt that bad practice was so deeply entrenched that there was little hope that much would change. No surprise that the retailers lobbied against the introduction of a regulator.

Enter Christine Tacon.

She quickly found her new office formally investigating the UK’s market leader, Tesco, for its transgressions of the grocery industry code of practice. The outcome was a set of requirements for the business to revise its trading conduct with suppliers. On a wider basis, the Adjudicator demonstrated that she could make a difference. Tesco trading practice has dramatically improved since the investigation.

The role of the regulator has been further beefed-up by giving her the power to fine retailers for abusing their power, with the fine being linked to turnover. All big grocery retailers know they have to pay attention. However, Christine’s preference is for a collaborative approach with the emphasis on talking to retailers and their suppliers with a view to promoting best practice.

There remains a reluctance amongst some suppliers to come forward which should not be a surprise given the tremendous imbalance of power that exists for some.

The lecture was very well-received by our students studying food industry and supply chain management. In a tweet following the talk, Christine thanked them “for asking more questions than I get from a room of suppliers!”.

 

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