Latest news from free-market enterprise Britain...
Fiona Walsh, business editor
Friday December 7 2007
Britain's supermarkets and dairy groups have been fined £116m
by the Office of Fair Trading, after admitting fixing the prices
of milk, butter and cheese.
Sainsbury's, Asda, Safeway, Dairy Crest, Wiseman and The Cheese
Company have all admitted to anti-competitive practices and the
case against them has now been resolved, the consumer watchdog
said today. But it is continuing its investigation into Tesco,
Morrisons and cheese maker Lactalis McLelland, which continue
to deny that they were involved.
Today's fines follow a three-year investigation into the industry
and relate to price-fixing over a two-year period from 2002 to
The price collusion is estimated to have cost consumers £270m
in higher prices.
While the fines total a maximum of £116m, the companies
will pay significantly less than that after being granted large
reductions in their penalties in return for co-operating in the
Sainsbury's, which has been fined £26m, insisted this morning
that the "price initiatives" had been designed to help
farmers after the outbreak of foot-and-mouth disease in 2001.
'We are disappointed that we have been penalised for actions
that were intended to help British farmers, but recognise the
benefit of a speedy settlement with the OFT," said chief
executive Justin King.
He added: "The price initiatives in 2002 and 2003, which
were widely and publicly reported at the time, were designed to
help British dairy farmers at a time of considerable economic
pressure and public debate about whether farmers were getting
a fair price for their products."
Earlier this year British Airways was fined a record £270m
by the OFT and the US Department of Justice for fixing the price
of fuel surcharges for long-haul passenger flights and its cargo
business, after rival Virgin Atlantic blew the whistle on the
Asda refused to disclose its fine but the figure is thought to
be similar to Sainsbury's, at around £26m. Asda said it
regretted the price collusion: "Our intention was to provide
more money for dairy farmers, who were under severe financial
pressure at the time.
"These issues concern all the major supermarkets but we've
chosen to settle this matter quickly because we believe it's the
right thing to do for our customers," the group said.
The companies insisted today that they made no extra profit as
a result of the price fixing. Dairy Crest, which has been fined
£9.4m, said their actions were "very well publicised
at the time and received widespread support including strong political
Alan Wiseman, chairman of Robert Wiseman Dairies, said he was
disappointed with the outcome of the investigation, and that "every
penny of additional revenues paid to Wiseman was passed directly
to our suppliers."
Dairy processor Arla Foods escapes without any penalties. The
company signed a leniency agreement with the OFT early on in the
investigation and was granted immunity.
Tesco continues to refute the OFT's allegations. Director Lucy
Neville-Rolfe, said this morning: "As we have always said,
we acted independently and we did not collude with anyone.
"Our position is different from our competitors and we are
defending our own case vigorously."