The Co-operative is being investigated by the supermarket regulator over its treatment of suppliers.
The Groceries Code Adjudicator (GCA) said there was “reasonable suspicion” the retailer had breached its rules.
It will look into Co-op’s “de-listing” of suppliers, and charges levied for comparing and assessing products to put on its supermarket shelves.
The Co-op accepted it had “fallen short” and disclosed it had already repaid £500,000 to 110 suppliers.
The retailer, still trying to re-build profits after a long restructuring, added that it had taken “decisive steps” to improve matters and would be writing to all its 1,500 suppliers.
However, GCA chief Christine Tacon said she had decided to launch a full investigation “to fully understand the extent to which the code may have been broken and the root causes of the issues as well as their impact on suppliers”.
“In particular, the investigation will consider the extent, scale and impact of practices which may have resulted in suppliers being de-listed with no, or short, fixed notice periods unilaterally imposed by Co-operative Group Limited without due consideration of published GCA de-listing guidance.”
Jo Whitfield, chief executive of Co-op Food, said the company acknowledged it had “fallen short” and has been in talks with the GCA for months.
The retailer said that as part of its changes, 110 suppliers had been refunded a total of about £500,000 in fees for product assessments – so-called benchmarking.
Other measures include:
- Steps to “strengthen our systems and processes for the future”
- Retraining of 450 staff in the operation of the Groceries Supply Code of Practice
- Writing to all Co-op’s 1,500 direct suppliers to seek information on any delisting decisions that they believe may have been taken without appropriate consultation
- Reviewing every case where a supplier was charged for benchmarking and quality control.
Ms Whitfield said: “We care deeply about our relationships with our suppliers and we are very sorry that… we have failed to live up to our usual high standards.
“We are already addressing the issues with the GCA and our suppliers and we hope the investigation will help bring to light any additional cases so that we can put these right as quickly as possible.”
The GCA, which was set up to ensure that the 10 large supermarket groups treat their direct suppliers lawfully and fairly, has the power to fine retailers up to 1% of annual turnover.
In 2016, the ombudsman found that Tesco “knowingly delayed paying money to suppliers in order to improve its own financial position”.
However, back then the GCA had no powers to fine supermarkets, only to make recommendations.
The GCA, an independent regulator which reports to the Department for Business and Energy and Industrial Strategy, wants suppliers and related parties to provide any evidence by 3 May.