The UK's largest supermarket Tesco has "seriously breached" a legally binding code to protect grocery producers by prioritising its own finances over the fair treatment of its suppliers, a new report has found.
The Groceries Code Adjudicator says the supermarket chain must introduce '"significant changes" as a result of the breaches.
The investigation was launched in February last year after an accounting error came to light - blamed by the chain on how Tesco logged suppliers' rebates and if they were reported in the correct accounting period.
Tesco's revealed a £250m profit overstatement - a figure that was later upwardly revised.
Adjudicator, Christine Tacon, said today: "The length of the delays, their widespread nature and the range of Tesco's unreasonable practices and behaviours towards suppliers concerned me.
"I was also troubled to see Tesco, at times, prioritising its own finances over treating suppliers fairly."
The investigation concluded that Tesco acted unreasonably when it delayed payments to suppliers "for lengthy periods of time".
The code breaches were widespread, according to the adjudicator's report.
The supermarket is now banned from deducting money owed for goods supplied; it must give suppliers 30 days to challenge any proposed deduction and it must also correct pricing errors within seven days, improve its invoicing and put its finance and buying staff through the report's findings.
The investigation found evidence that Tesco delayed payment as a result of data input errors, duplicated invoicing and made deductions to maintain Tesco's margin.
One supplier was owed a multi million pound sum by Tesco which the supermarket took more than two years to repay, the report said.
While the adjudicator found Tesco guilty of delaying payments, it said the chain had not breached the code in relation to payments in return for better positioning of goods on shelves.
However, Ms Tacon indicated there would be more work industry-wide on such practices.
She did not have the power to issue any financial penalty but could yet intervene if Tesco fails to meet its future obligations.
The company's chief executive, Dave Lewis, said he accepted the findings: "In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers.
"We shared these practices with the adjudicator, and publicly apologised.
"Today, I would like to apologise again. We are sorry."
He added: "Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report.
"The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed."
