Tesco 'delayed' OFT report

SUPERMARKETS giant Tesco today faced damaging claims that it tried to delay a wide-ranging inquiry by the Office of Fair Trading into the relationship between top supermarkets and their suppliers.

According to industry insiders, believed to include both its rivals and some of the company's suppliers, the group dragged its feet during the early stages of the OFT investigation and as a result was partly responsible for delays to the watchdog's report.

Tesco denied the accusations, telling This is Money today that it was 'wrong' to suggest it had in any way dragged its feet.

Group spokesman John Church said: 'It took us longer than other, smaller retailers to get some of the information. This was because of the complexities in our system of record-keeping, things are kept at different sites. We are bigger than some of the others involved in this review and we have worked transparently with the auditors. Any suggestion to the contrary is false.'

But the accusations, contained in a Financial Times report today, are unlikely to go away until publication of the OFT report. The Office of Fair Trading is reviewing whether the code set up by the Competition Commission to ensure fair trading in the retail sector is working satisfactorily. The review began in 2003 following complaints from suppliers and was supposed to have reported by the end of 2004.

The OFT confirmed a year ago that there it had found widespread dissatisfaction among suppliers, and said: 'Following consultations with suppliers, trade associations and Asda, Sainsbury, Safeway and Tesco, 80%-85% of respondents claim the code has failed to change the supermarkets' behaviour.'

Although the OFT is expected to publish details of its review in the next few weeks some suppliers claim that part of the delay is due to Tesco's slowness in providing information to the auditors working for the OFT. A rival even claimed that Tesco had 'held the whole thing up'.

Industry analysts say that the extent to which suppliers are reliant on the major supermarkets for their business means none will put their head above the parapet to complain about perceived unfair practices. There has not yet been a single complaint under the industry code's mediation procedure.

The OFT believes that the fear of complaining was the main reason for the code's perceived lack of effectiveness. Its review will spell out whether suppliers are justified in their claims of strong-arm tactics by retailers and may make recommendations for change.

Among the suppliers' demands are that they should not have to contribute to supermarkets' marketing costs, that they should not have agreed prices cut retrospectively and that all invoices should be paid within 30 days ? Sainsbury has reportedly tried to force suppliers to wait 50 days for payment.

Government research last year showed that the share of money from supermarkets' tills that goes to farmers fell from 57% in 1988 to 41% in 2003.

Tesco, which claims to be the biggest customer for UK farmers, said it was not correct to say the retailers exploited their suppliers. The company said: 'As we become more successful, so too do our suppliers. There are many examples of this. We are as dependent on our suppliers as they are on us. It is an important relationship and it is not in our interests to abuse it.'