Asda forced to repay suppliers after watchdog’s fair dealing probe

Asda has been forced to pay back hundreds of thousands of pounds to suppliers after breaching an industry code governing fair dealing.

The Groceries Code Adjudicator found the company to have demanded up front payments worth up to a quarter of the value of annual sales of particular products in order for suppliers to keep their business with the supermarket, The Guardian reported.

Some of those who refused to make these payments, which were greater than those agreed in suppliers’ contracts, were given notice that they would be ousted within as little as four to eight weeks, according to the industry watchdog.

Other changes including cost price reductions were also demanded from suppliers with as little as 24 hours notice under the group’s project renewal plan, designed in partnership with the Bain & Company consultancy to save costs and help cut prices for shoppers.

The demands, reported by the Guardian last year, were in breach of the grocery supply code of practice – government-backed regulations that can attract a fine of up to 1% of UK turnover.

In a “code clarification” document published this week, the Groceries Code Adjudicator (GCA), said it had not decided to launch a formal investigation into Asda’s behaviour or issue a fine.

The regulator said a review had found that the Walmart-owned chain had breached “the overarching principle of fair dealing” in the code with conversations “designed to carry an implication of detriment if any supplier declined to agree” to its demands.

The watchdog said there was no need to launch an investigation. Asda had “proactively engaged with suppliers to rectify any lump sum arrangements, which should not have been made” and put further safeguards in place to prevent any further breaches.

The GCA report added that the project renewal strategy had been designed by a consultancy commissioned by Asda to achieve cost savings, and it was clear that “the role of the third party consultants was closely bound up with the issues raised”, as they had been able to achieve bonuses based on the amount of money they were able to save Asda.

Project renewal was launched in late 2015 under former chief executive Andy Clarke.

Asda’s current chief executive, Sean Clarke, said: “Our mission is to save customers money through low prices by always securing the lowest possible costs built on a foundation of strong, trusted partnerships with our suppliers and absolutely in line with the groceries supply code of practice (Gscop).

“The matter raised in the GCA’s case study occurred over a year ago and since then we have significantly strengthened our Gscop compliance programme. We have engaged openly and transparently with the GCA to support her enquiries in keeping with her collaborative approach.”

Bain said in a statement to The Guardian: “As per our company policy, we do not speak publicly about who may or may not be our client.”