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Supermarkets fined over prices

07/12/2007

Several supermarkets and dairy processors have agreed to pay fines totalling more than £116 million over claims they fixed the price of dairy products.

The Office of Fair Trading (OFT) said the parties concerned had all admitted involvement in certain "anti-competitive practices".

News of the fines comes after the trading watchdog said in September it had found provisional evidence several large supermarkets and dairy processors had colluded to increase the retail price of milk, butter and UK-produced cheese.

In a statement this morning the OFT said grocers Asda and Sainsbury's had accepted liability over the charge in principle. Charges were also accepted in regard to the operations of former supermarket chain Safeway, which was bought by rival Morrisons in 2004.

Dairy processors Dairy Crest, The Cheese Company and Wiseman have also agreed to fines over the alleged price-fixing activities – which the OFT claims took place in 2002 and 2003.

The regulator said it was pleased at the "early and constructive cooperation" given by those concerned.

It confirmed each company would receive a "significant" reduction in the financial penalty which would otherwise have been imposed against them, providing they continued to cooperate fully over the matter.

The OFT is to continue its case against supermarket firms Tesco and Morrisons and dairy firm Lactalis McLelland.

Responding to the fines imposed on them, both Sainsbury's and Dairy Crest insisted they had acted to increase prices in order to help British farmers.

"We are disappointed 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 Sainsbury's chief executive, Justin King.

The supermarket is to be fined £26 million over the price-fixing allegations.

Dairy Crest confirmed it had agreed to pay a £9.4 million penalty over the matter and said the OFT's investigation related to a period when the farming community was facing "extreme difficulties" following the foot and mouth outbreak in 2001.

"The milk price initiatives in 2002 and 2003 were aimed at supporting farmers through this difficult period by returning higher prices to them for their milk," the company stressed.

"The implementation of these initiatives was very well publicised at the time and received widespread support including strong political backing," Dairy Crest added.