Regulators have launched a probe into the Co-operative Group that could force it to pay £70m of fines for mistreating its suppliers.
The retailer has already agreed to repay £500,000 to 110 suppliers after the Groceries Code Adjudicator raised concerns about the way it delisted products and demanded fees for quality control and benchmarking exercises – where products are compared against those from other companies.
The Co-op acknowledged it had “fallen short” and said it was already taking “decisive steps” to “ensure the fair treatment of all of our suppliers”.
That included retraining 450 staff and writing to 1,500 suppliers to find out whether they felt their products had been inappropriately delisted.
The GCA, which has the power to fine grocers 1pc of their turnover, said it is now seeking information from the Co-op’s suppliers to determine the “extent, scale and impact” of the problem.
Christine Tacon, head of the GCA, said: “After carefully considering all the information submitted to me, I have decided that an investigation is necessary so I can fully understand the extent to which the Code may have been broken and the root causes of the issues that have been raised with me.”
The probe will focus particularly on whether suppliers were “de-listed with no, or short, fixed notice periods” that were “unilaterally imposed” by the Co-op.
Jo Whitfield, who runs the Co-op’s food business, said: “We care deeply about our relationships with our suppliers and we are very sorry that in these two areas we have failed to live up to our usual high standards.”
The relationship between supermarkets and their suppliers has faced greater scrutiny since Tesco’s accounting scandal in 2014, when it emerged the grocer had been booking income from its suppliers incorrectly to inflate its trading figures.