Tesco To Be Investigated By UK Watchdog Over Dealings With Suppliers

U.K.-based multinational retailer Tesco will face an official investigation over allegations that its practices led to delays in payments to suppliers. The country's Serious Fraud Office is already investigating the retailer’s accounting practices, which allegedly led to a 263 million pound (about $400 million at the current exchange rate) profit overstatement.

In a statement released Thursday, Christine Tacon, the British Groceries Code Adjudicator (GCA), said that she was initiating the investigation after having “reasonable suspicion” that Tesco had violated the Groceries Supply Code of Practice, which all retailers in the country are legally obligated to comply with. In the statement, Tacon said that she had taken the decision after considering information relating to practices associated with the over-statement of profits announced by Tesco last September.

“The investigation will also consider the existence and extent of practices where suppliers have been required to make payments for better positioning of goods, which are not related to a promotion,” she said, in the statement.

According to the statement, Tacon has already discussed the practices in question with Tesco and will now seek more information from suppliers before determining a further course of action. The investigation is expected to take up to nine months.

Although the specifics of the allegations leveled against Tesco have not been disclosed, Tacon said, in the statement, that the investigation will cover the conduct of Tesco from June 25, 2013 -- when the GCA was created -- to Feb. 5, 2015. This is the first investigation by the watchdog, which was created to regulate the relationship between the country’s retailers and their suppliers.

“This is a historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth,” Vince Cable, the British business secretary, reportedly said on Thursday. “Now that a formal investigation has been launched, I would encourage anyone with any evidence of wrongdoing to come forward.”