Supermarket group Tesco "seriously breached" a legally binding code to protect suppliers in order to prop up its own finances as it battled an industry slowdown, the UK's grocery watchdog ruled today.
The Groceries Code Adjudicator, Christine Tacon, launched an investigation into Tesco last February in the wake of the firm's £263m profit over-statement.
This was revealed in September 2014 and a separate UK Serious Fraud Office investigation is ongoing.
"The length of the delays, their widespread nature and the range of Tesco's unreasonable practices and behaviours toward ssuppliers concerned me," Tacon said, issuing a series of recommendations to Britain's biggest retailer.
"I was also troubled to see Tesco at times prioritising itsown finances over treating suppliers fairly," she added.
The accounting scandal, which contributed to one of the biggest annual financial losses in British corporate history, led to the departure of several top Tesco executives and plunged the firm into a crisis it is still to fully recover from.
Tesco said today it accepted the findings of the report and would continue to work with suppliers to build trust after working hard over the past year to change the business.
"I would like to apologise again. We are sorry," Tesco's chief executive Dave Lewis said in a statement.
"We have changed the way we work by reorganising, refocusing and retraining our teams and we will continue to work in a way which is consistent with the recommendations," the Tesco CEO added.
Tacon found Tesco acted unreasonably by delaying payments to suppliers, often for lengthy periods of time, and has told the group to introduce significant changes to its practices.
She expressed concern about three key issues - unilateral deductions from suppliers, the length of time taken to pay money due to suppliers, and in some cases an intentional delay in paying suppliers.
She said Tesco's breach of the code was serious because of the varying and widespread nature of the delays in payment.
The GCA has recently been given powers to fine supermarkets in the UK, but they came too late for the Tesco case.
Tacon's recommendations include stopping Tesco from making unilateral deductions from money owed for goods and giving suppliers 30 days to challenge any reduction.
If challenged, Tesco will not be entitled to make the deduction. Tesco has been given four weeks to say how it plans to implement the recommendations.
Lewis, who had to handle the fallout from the accounting crisis shortly after becoming CEO, has already acted to improve compliance and change the way Tesco works with suppliers.
Earlier, this month the firm reported better than expected Christmas trading, indicating it may finally be on the mend.
