Tesco has said it could take legal action against the decision from the UK’s Office of Fair Trading to fine the retailer over GBP10m (US$16.1m) for fixing the price of cheese.
The OFT today (10 August) issued the final penalties on four retailers and five dairy processors for fixing the price of milk in 2003 and the price of cheese in 2002 and 2003.
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A total of GBP49.5m in fines were imposed after the OFT found retailers had indirectly informed each other of what prices they would levy on dairy products through the manufacturers.
OFT chief executive John Singleton said: “This decision sends a strong signal to supermarkets, suppliers and other businesses that the OFT will take action and impose significant fines where it uncovers anti-competitive behaviour aimed at increasing the prices paid by consumers.
“Competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers across the UK in terms of innovation, choice and improved value for money. Our investigation and this final decision will help ensure that this competition is maintained.”
The announcement brought an end to an affair that started in 2003 when the OFT launched an investigation into alleged price fixing on milk, cheese and butter.
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By GlobalDataSome retailers, including Asda and Sainsbury’s, had admitted fixing prices but Tesco had declared its innocence throughout the investigation.
However, the OFT has fined Tesco GBP10.4m for colluding on cheese prices in 2002 and 2003.
Nevertheless, Tesco said the OFT’s ruling was “entirely without substance” and claimed the “long delay” in solving these cases illustrated “some important weaknesses in the current UK competition regime”.
Lucy Neville-Rolfe, Tesco’s director of corporate and legal affairs, said the ruling was a surprise, given Singleton’s comments about the level of competition in the sector and the benefits it had brought to shoppers.
Neville-Rolfe added: “We have always said we did not collude on prices on cheese and we stand firm in our rebuttal of these ongoing allegations. We will continue to defend our position vigorously, through the courts if necessary.”
In September 2007, the OFT said collusion between the companies had cost consumers GBP270m.
Three months later, it was announced that Asda and Sainsbury’s, plus dairy manufacturers Dairy Crest, The Cheese Company and Robert Wiseman Dairies, had admitted price fixing and agreed to pay combined fines of up to GBP116m.
A year later, Morrisons secured an out-of-court settlement worth GBP100,000 with the OFT after the competition watchdog admitted it made false accusations against the retailer during its investigation.
Last year, the OFT dropped some of the allegations against all those involved. It said it did not have find enough evidence to support allegations that the retailers and manufacturers had fixed prices on liquid milk in 2002 and butter in 2003.
The OFT also dropped its allegation that Tesco had fixed milk prices in 2003.
The other retailers and processors involved were handed a discount on their fines for admitting liability. Robert Wiseman Dairies, for example, saw its original fine cut from GBP6.1m to GBP3.2m.
Arla Foods was found to have fixed the price of milk in 2003 but received “immunity” from the fines as it was the first company to inform the OFT about possible price fixing. It was the first to apply for “leniency” under the OFT’s “leniency programme”, the watchdog said.
