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Groceries Code Adjudicator issues “Code clarification” regarding Asda

The Groceries Code Adjudicator (GCA) has recently published a Code clarification on the variation of supply agreements and other issues regulated under the Groceries Code.

The Groceries Suppliers Code of Practice (GSCOP) regulates and protects the position of direct suppliers to the major UK supermarkets. There is an overarching principle of “fair dealing”.

In 2016, Asda implemented a project to achieve cost savings following a difficult trading period. Suppliers were asked for significant financial contributions to keep their business with Asda. Suppliers were given very little time to agree. Sometimes as little as 24 hours (or in one extreme case overnight).

The GCA has been having various discussions with Asda and has concluded that aspects of this project did not comply with the Code. Asda accept that. The GCA has decided not to launch an investigation into Asda. However it has issued a Code clarification report (which notes that Asda has “proactively engaged with all its affected suppliers to rectify any lump sum arrangements which should not have been made”).

The GCA clarification (issued on 4 September 2017) deals with a number of issues including that requests for prospective investment not explicitly agreed to in an existing supply agreement will potentially be seen as an attempt by the retailer to vary the supply agreement. While retailers can ultimately vary, it is important that there is provision for this in the supply agreement and that reasonable notice should first be given to suppliers. Aggressive tactics and giving suppliers short time periods to respond was criticised by the GCA.