The investigation into Tesco highlighted to the GCA a range of practices in relation to paragraph 12, however it was unclear if these practices where a breach of GSCOP. The GCA wanted to know more about them and in particular, their impact on direct suppliers in order for her to give clarity as to what was code compliant, and what practices where not.
The responses helped the GCA understand how widespread these practices are among the 10 regulated retailers, what forms they take, their impact on suppliers (large and small) and the effect it has on competition and consumer choice. This therefore allowed the GCA to determine the proper scope of paragraph 12 of the GSCOP, specifically in relation to indirect requirements for payment to secure better positioning or increased shelf space.
The GCA concluded that, “there was not enough information provided to support the need for interpretative guidance or other regulatory intervention” as the responses from both retailers and direct suppliers showed there had been a change in the approach taken by the regulated retailers since the appointment of the GCA in 2013.
Under paragraph 12 of GSCOP, retailers are not permitted to directly or indirectly require suppliers to pay for better positioning on shelf, or for increased shelf space, unless in relationship to a promotion.
The GCA has concluded, “that any retailer demand for payment to be made other than in accordance with the Supply Agreement that results in a supplier negotiating better positioning in return is not part of normal commercial negotiations and might amount to an indirect requirement contrary to paragraph 12 of the Code. Discussions about “investment” and offers of payments made by suppliers to retailer that might come together with a discussion about better positioning or increased space should demonstrably be freely held as part of normal commercial negotiations, if they are to comply with paragraph 12 of the Code.”
Payments for category captaincy and category management
“The GCA considers that any direct or indirect requirement from retailers to suppliers to make any payment to participate in category captaincy or category management and which results in the suppliers receiving better positioning or increased space, is likely to be a breach of paragraph 12 of the Code.
The GCA has noted the responses from suppliers who provide category advice that they do this to help grow the category as a whole and to improve the overall offer to consumers. The GCA supports this as the principal aim of category advice provided by suppliers.
The GCA has noted that some retailers have clear policies on how they manage supplier involvement in category advice, including how they make sure that suppliers involved in this activity act objectively. Not all retailers mentioned whether they had such policies. It might be prudent for regulated retailers who engage with suppliers on category captaincy or category management to have a policy setting out how they manage supplier involvement, including consideration of whether other suppliers are able to contribute to or challenge the category advice received from the appointed category captain or category manager.”
Payments to participate in range reviews
“The GCA considers that any direct or indirect requirement from retailers to suppliers to make any payment to participate in a range review and which results in the supplier receiving better positioning or increased space is likely to be a breach of paragraph 12 of the Code.
While several retailers indicated that they had policies setting out how they managed category advice from suppliers, none expressly indicated that it had any policy in relation to supplier participation in range reviews. This might be something for retailers to consider in future.”
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