Ms Christine Tacon:

Some Members may not know what constitutes a forensic audit so, if I may, I shall explain the terminology. Many of the retailers use third party "no win, no fee" auditors to go through their emails and accounts to see if there is any evidence. By law, auditors are allowed to go back six years to find if there is any evidence that the supplier might owe them money. At the time, in 2014, the auditors used to find some scrap of evidence that something had happened and would send a bill to the supplier saying, "This happened five and half years ago, you ran a promotion, we should have charged €60,000 but we have no evidence that the €60,000 was paid, here is your invoice and, unless you can prove to the contrary, we are deducting it". That is what happened because the supplier could not find the evidence that quickly. Also, the instance was a long time ago so the accounts manager who set it up would probably have moved on. Therefore, many of the suppliers tried to settle with the retailer and offered to go 50:50 but they really struggled with trying to sort the matter and, as they had no evidence to the contrary, sums were deducted.

However, I said, "That is a delaying payment, you have given them goods and they have not paid you for those goods because they have deducted this money from it". My example of €60,000 is real and, luckily, the entity has managed to find the accounts manager who set this up and he said that the entity did not use their staff but its own staff for the promotion so the €60,000 was not due. As soon as the evidence was produced the issue went away. In many cases these third parties probably know that they will not get any money unless they produce proof. What tends to happen is that the first auditor working on the accounts takes a cut of, let us say, 5% of anything he or she finds, and then another auditor goes through the same data and if he or she finds something he or she might get a 15% cut. In some cases, as many as three auditors are used and by the time the third one goes through the accounts he or she will have taken 25% of anything he or she finds.

The auditors often work under the retailer's email address or addresses so no-one knows whether it is the retailer or auditor who has written. The aggression with which the auditors work is very threatening. Nearly all of this was allowed but the deduction is against the code. Going back six years and aggressively finding information did not break the code or law but, as it was such an issue, I raised it with all of the retailers. As a result, one by one they all agreed. It is unfair to go back so long so I said to them, "You are big businesses so you should be able to sort out your accounts within the current year plus one year". A representative of one business said that the business nearly went under due to the number of claims submitted. One also realised that many of the claims were right but the businesses did not know about them because the accounts manager had dealt with them under the table.

When I said to the businesses that they should sort out their accounts in the current year plus one year, one retailer broke ranks and suggested that it could sort its accounts out within the current year plus two years. Then I went around all of the retailers and I got eight out of ten of them to agree to not go back more than two years. One of the ten that did not agree has since agreed and some of the new retailers, with whom I now work, have agreed to this. We have been able to get everything cleaned up when it is much more likely to have the evidence and the memory inhouse. The audits were so aggressive and the decrease from 45% down to 7% was largely due to the voluntary agreement and because I mandated, after the Tesco investigation, that nothing could ever be deducted without giving a supplier 30 days' notice. If the supplier challenged the deduction the money stayed with the supplier until proof was provided.