Tesco could face large fine from GCA investigation

5th Feb 2015 07:15

As it awaits the findings of a Serious Fraud Office probe, Tesco is facing a potential fine of over £600m after a new investigation was launched by Christine Tacon, the government's Groceries Code Adjudicator, who warned other supermarket groups may also be reviewed.The retailer is suspected of breaching the Groceries Supply Code of Practice and an investigation into the accusations will now take place over the next six to nine months, though some analysts dismissed the new probe as coming "after the horse had bolted".Tacon's investigation relates to Tesco's £263m profit over-statement announced in September 2014.She has been given extended powers that include the authority to sanction companies with a fine of up to 1% of sales, which with Tesco forecast to make £61.7bn sales this year could amount to over £600m."She has discussed the practices with Tesco and now needs more information from direct suppliers and others to determine what further action to take," a statement from the GCA said.While the investigation is currently focused only on Tesco, GCA noted that if evidence leads to other retailers it may be extended to include them.Tacon said: "This is the first investigation I have launched and it is a significant step for the GCA. I have taken this decision after careful consideration of all the information submitted to me so far."I have applied the GCA published prioritisation principles to each of the practices under consideration and have evidence that they were not isolated incidents, each involving a number of suppliers and significant sums of money."However, as Tesco has already made public announcements to the market on the profit overstatement and the Financial Conduct Authority probe has been superseded by the SFO investigation, analyst Clive Black at Shore Capital said the GCA probe "feels very much like self justification by an organisation that has talked much but not actually done anything of note in practical terms to our minds".He added that he would be "surprised to see a material fine".