Auditing the grocery supply chain

In September 2014, the major supermarkets will present to the Groceries Code Adjudicator, Christine Tacon, their future proposals for the auditing of supplier accounts.

15 August 2014

In September 2014, the major supermarkets will present to the Groceries Code Adjudicator, Christine Tacon, their future proposals for the auditing of supplier accounts. This comes amid growing unease from suppliers that the supermarkets have become increasingly aggressive in the way they trawl through historic accounts to identify possible discrepancies. This can result in the supplier receiving a hefty and unforeseen bill long after accounts have been closed. The practice of supermarkets to automatically set-off amounts they claim are owed only compounds the potential injustice to suppliers.

The Adjudicator has proposed a move to moderate these practices and limit such audits to the current and last two financial years. The concern is that the supermarkets have an unfair advantage in their ability to deploy the resources necessary to conduct these audits. There is also their commercial muscle and it can be difficult for suppliers to resist claims where there is an ongoing trading relationship.

The supermarkets, in common with other purchasers, have the right under the law to bring a claim up to six years after a discrepancy is identified. We know from practical experience that discrepancies can easily arise where there have been issues identified in things like the calculation of overriders. The application and calculation of the discount can be complex, particularly where at any given time there might be a myriad of prices and promotions in force.

It is no doubt the uncertainties and iniquity to suppliers that has triggered the review of current auditing practices. We are keen to hear from suppliers who may have encountered issues with such audits as there may be other avenues available under the law to fend off such claims.

For more information contact our Commercial team.

Key contact

Helen Scott-Lawler

Helen Scott-Lawler Partner

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