Guidance

Forensic auditing: Retailer voluntary commitment

Updated 8 February 2023

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1. Background and Groceries Code Adjudicator (GCA) progress

Under the Limitation Act 1980, contracting parties can make claims against one another going back up to six years. The GCA initially heard this was being used proactively by some designated retailers to make claims against their direct suppliers for historic invoicing errors or omissions.

Suppliers were being asked for significant sums of money with the burden of proof falling on them to show that any discrepancies were not valid claims. The documentary audit trail was often complex and difficult to piece together after a long period of time. Suppliers reported that deductions would be applied by retailers with little or no notice.

From 2014 onwards designated retailers agreed to adhere to the GCA’s voluntary commitment under which retailers agree to limit the auditing of their direct suppliers’ trading accounts in search of missed claims to no more than the current and previous two financial years, on a reciprocal basis with those suppliers. This means that only suppliers who agree to limit their own audit activity in return can benefit from a retailer’s commitment to do so. The designated retailers have confirmed that, apart from acknowledging the reciprocal nature of the voluntary commitment, no other requirements are imposed on direct suppliers who wish to take advantage of the same.

Over the intervening years (1) more designated retailers have agreed to adhere to the voluntary commitment with J Sainsbury plc agreeing to adhere from 6 March 2022 and Amazon UK (Amazon.com, Inc. was designated by the Competition and Markets Authority with effect from 1 March 2022) from 16 December 2022.

The GCA continues to monitor what suppliers report of their experiences.

2. Potential Groceries Supply Code of Practice (the Code) breach

Although it cannot interfere with parties’ statutory rights to bring contractual claims, the GCA considers that where unilateral deductions are made by designated retailers against their direct suppliers’ current invoices, the effect of this practice falls under paragraph 5 of the Code: No delay in Payments, read with paragraph 2 of the Code: Principle of fair dealing.

(1) The years in which the designated retailers agreed to adhere to the voluntary commitment are set out below:

  • Aldi Stores Ltd (2014);

  • Amazon UK (Amazon.com, Inc. was designated by the Competition and Markets Authority with effect from 1 March 2022) (2022);

  • Asda Stores Ltd (2014);

  • B&M European Value Retail SA (2019);

  • Co-operative Group Ltd (2014);

  • Iceland Foods Ltd (2014);

  • J Sainsbury plc (2021 with effect from 6 March 2022);

  • Lidl GB Ltd (2014);

  • Marks and Spencer plc (2014);

  • Ocado Retail Ltd (2019);

  • Tesco plc (2014);

  • TJ Morris Ltd (trading as Home Bargains) (2020);

  • Waitrose Ltd (2019); and

  • Wm Morrison Supermarkets plc (2014).

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