Findings by the grocery watchdog that Tesco deliberately delayed payments to boost profits may increase the likelihood of legal action by shareholders who say they lost tens of millions of pounds over the company’s profits mis-statement in 2014.
David Scott from Scott+Scott, the law firm representing Tesco Shareholder Claims, which is asking British shareholders to join a group seeking billions of pounds in compensation for losses, said: “Today’s report confirms that pressure to meet financial targets drove the company’s behaviour.”
However, Scott said the group would wait to see the results of a separate investigation by the Serious Fraud Office before pressing ahead with its claim.
Tesco is also facing potential legal action from a separate group of between 50 and 100 institutional British shareholders.
Law firm Stewarts Law said it would be writing to Tesco shortly as a prelude to formal legal action that will seek to prove misleading statements were made to the market by the retailer, upon which shareholders relied when making investment decisions.
Stewarts Law made the announcement on Tuesday after the UK supermarket regulator, the groceries code adjudicator, ruled that the supermarket had deliberately delayed payments to suppliers to support its profits.
The GCA said the company had seriously breached its code and must make “significant changes” in the way it deals with suppliers.
Tesco is also facing potential legal action in the US, where it has already agreed a $12m (£7.94m) deal to settle one of two shareholder class action suits over its accounting scandal.
Stewarts Law began soliciting angry shareholders to support joint action against Tesco in September 2014, backed by Bentham Europe, an offshoot of Australian group IMF Bentham, which specialises in funding litigation.
It said it was moving forward with legal action in the light of what it claimed was “mounting evidence that Tesco’s management were aware that the financial statements were untrue or misleading”, including recent press reports that the Serious Fraud Office has interviewed former senior executives and is considering agreeing a deal with Tesco.
Jeremy Marshall, chief investment officer of Bentham Europe, said: “The prospect of litigation is a necessary consequence of the apparent failure of Tesco’s former management to protect their shareholders from avoidable losses. We hope the company will face up to the seeming failings of previous management and move swiftly to resolve this dispute.”
Tesco’s chief executive, Dave Lewis, who joined the business in September 2014, just a few days before the accounting scandal emerged, said the company had not received any formal contact from shareholders with regard to legal action in the UK and had not made any financial provision for it.
He added that it was misleading to link the findings of a grocery watchdog inquiry, the results of which were published on Tuesday when Stewarts Law issued its press release, to the Serious Fraud Office inquiry.
“What either investigator is investigating is different and the onus of proof is completely different,” he said.
There have been suggestions that the SFO could release the findings of its inquiry as early as this week. City analysts have warned that Tesco could face a £500m fine for its multimillion pound accounting scandal.